New Guidance for the US Senate Budget Committee

The US Senate Committee on the Budget is an unusual body. The committee was established in 1974 in response to President Richard Nixon’s “freezing” of funds appropriated by Congress to prevent spending on programs he did not like. This led to a constitutional crisis, as the US Constitution gives Congress the power of the fund. Congress responded by creating the Congressional Budget and Impoundment Control Act of 1974 and the Senate Appropriations Committee. The committee is legally responsible for “making budget plans for Congress and monitoring and enforcing laws relating to spending, revenue and the federal budget.”

During its two years in the 118th Congress (2023-2024), the committee deviated from this mission. It held 43 hearings, several of which focused on the national budget. Twenty-four of them dealt with the impact of climate change on the economy. Incumbent Committee member Chuck Grassley (R-Iowa) revealed in an April 2024 letter that House Majority Committee Chairman Sheldon Whitehouse (D-RI) used the committee to wage a dangerous war, fueled by improper witness testimony. Grassley was responding to a March 2024 letter from the Whitehouse to Republican committees, in which he complained about their complaint. Grassley also pointed out in his letter that other committees, such as the Environment and Public Works and Finance committees, have greater authority over climate change policy.

With Republicans in control of the Senate on Jan. 3, 2025, a Republican senator will replace Whitehouse as chairman, potentially steering the committee in a new direction. Looking back at its hearings in the 118th Congress and before those in the 119th, we humbly offer some suggestions and comments to help the Senate Appropriations Committee deliver value. After all, much remains to be done to fix our nation’s $1.8 trillion deficit and $33 trillion debt mountain.

1. Bring the focus back to the core mandate. In 2023-2024, few of the Budget Committee discussions actually focused on the budget. In addition to 24 focusing on climate change, others focus on unrelated topics such as reproductive freedom, immigration, and income inequality.
2. Give the other side a chance. There is a bad tradition in congressional hearings for the majority to testify shortly before the hearing. This evil strategy deprives the few of sufficient time to read and digest what the majority is proposing. The committee’s hearing on December 18 brought this abuse to an extreme. Two notable reports accompanying the hearing: the 36-page report “Uncovering the Economic Costs of Climate Change” and the 84-page “Next Fall: The Climate-Driven Insurance Crisis Is Here—And Getting Worse” are both highly technical and data-rich. the reports were released hours before the trial, which gave precious few time to familiarize themselves with their contents. It is difficult to deliver a book review for a book that you have not had the opportunity to read.

3. Set up cherry picking data. The committee has a history of cherry-picking sources and data. For example, it has used arguments and data in reports prepared by Insure Our Future, a broad-based organization whose partners focus on theory rather than science. One such partner is the Connecticut Citizen Action Group, which describes itself as dedicated to “engaging Connecticut citizens in changing power relations to bring about a just society.”

4. Look for the most relevant data. The case dated Dec. 18, 2024 was supposed to focus on non-renewable insurance data requested from insurers on Nov. 2, 2013. It was not clear that non-renewal includes purchasing a consumer-driven policy, in which case non-renewal data does not accurately reflect insurer behavior. A more informed analysis would have simply looked at insured losses and aggregated estimates by state and subdivisions. So the committee’s view that non-renewals are the best predictors of climate change-driven insurance outflows is flawed, as are the conclusions based on that data.

5. Free from hyperbole. The Budget Committee has been the source of unnecessary scaremongering, declaring the insurance industry at risk of collapse and a crisis driven by climate change. The committee reported that “climate change poses new systematic risks to the US economy; systemic risks that may extend beyond the immediately affected sectors and cause widespread economic damage. The main risks are the collapse of the insurance sector which affects the housing and property markets.” The argument goes like this: Climate change causes property losses, which increases insurance premiums and leads insurance agents to stop offering insurance. Homeowners are leaving their homes as a result, thereby causing a loss of home values, exacerbating the housing crisis, creating a major financial challenge, and crippling our economy—especially if carbon emissions are not quickly brought under control.

6. Report good news. The committee noted that insurance availability and affordability are particularly critical issues in Florida and California. What their analysis fails to report is that these are special cases. Florida’s insurance-related woes stem from malpractice lawsuits, while California’s issues stem from an insurance law that effectively limited insurance agents to price limits with risk-adjusted rates. However, the situation in both states has improved. Tort reform measures passed in Florida in 2023 are helping to stabilize the insurance market, and California insurance regulators are beginning to allow insurers to factor weather trends and insurance costs into their rates.

7. Reduce wasteful government programs. The committee missed the opportunity to comment on two areas of climate change do impact on the budget: government spending on flood damage and large subsidies to crop insurance consumers. Currently, the state’s flood insurance program is $20.5 billion in liabilities. The government’s crop insurance program subsidizes two-thirds of the cost that farmers pay for insurance. As a result, flood insurance and crop insurance are sources of large disaster payouts. The budget could benefit from reducing these wasteful programs or introducing free market policies. (Are you listening, Elon and Vivek?)

8. Develop a strong structure. The best protection against losses due to natural disasters, including those exacerbated by climate change, is to build strong. Building strong homes, following building codes, and avoiding unsafe construction can reduce the need for government disaster relief. Examples of successful programs in action include Strengthening Alabama Homes, whose homes with “hard” roofs sell for 7 percent more than those without. Forest resiliency bonds effectively introduce private financing to help contain California’s wildfire risk.

9. Tell the truth about the financial situation of insurers. Although the Appropriations Committee maintains that insurance companies are failing and home prices in Florida are rising, the facts say otherwise. Median Florida home prices have been stable over the past two years, at around $400,000 (up from $250,000 in 2020). In the same period, the property and casualty insurance sector’s gross income increased from $929 billion to $1.13 trillion at a compounded rate of 97.8 percent through Q3 2024—the healthiest financial result in the past five years.

The Senate Budget Committee has an important job. Fingers crossed the start of the 119th Congress has constructive work to reduce our nation’s crippling debt and deficit. And if it doesn’t, you can count on R Street to guess it.

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