Federal Relations

January 7, 2011

Fiscal Issues Dominate First Days in Congress

The 112th Congress convened Wednesday amid ceremonial pomp in the House with the election of Speaker John Boehner (R-OH). Their first order of business was to adopt a rules package for the 112th Congress that is designed to advance Republican priorities to control federal spending, cut the deficit, and makes the chamber more accountable to the public.

On Thursday, the House adopted a resolution that would make 5 percent reductions the next two years to the budgets for House offices, including those of members, leaders, and committees. Republicans estimate that the cuts will save more than $35 million in the first year alone and see the measure as the first of many steps to fulfill their promise to cut federal spending.  House Budget Committee Chairman Paul Ryan (R-WI) said that in addition to cutting current-year spending, further cuts to discretionary spending would be made for FY12. The plan in coming months is to cut FY11 non-security funding down to 2008 levels, which would now amount to a cut of about $60 billion given that domestic agencies will have been funded at 2010 levels for five months of the fiscal year by the time the existing CR expires March 4th.

Also on Thursday, US Treasury Secretary Tim Geithner called on Congress to raise the existing $14.29 trillion debt limit soon, as he estimates the current ceiling will be reached sometime between March 31 and May 16 and that the government now is only $335 billion away from that limit. Raising the debt limit simply allows the government to fund obligations established by both Republican and Democratic Congresses and wouldn’t alter or increase the nation’s obligations. Geithner also emphasized that a default is very different from a temporary shutdown of the government caused by the failure to enact appropriations bills, such as occurred in late 1995 and early 1996. Even if Congress were to immediately cut spending to 2008 levels as suggested by Republicans, it would only delay the need to increase the debt limit by no more than two weeks. Republicans in both chambers say they will agree to raise the debt limit only if the White House agrees to major cuts in federal spending. Although some rank-and-file Republicans have said they won’t agree to any increase and see it as a way of prompting a government shutdown, GOP leaders have maintained that an increase will have to occur and have eschewed any talk of government shutdowns.

Several measures were introduced in the House yesterday that would reduce federal agency budgets by 5, 10, or 15 percent. These measures will likely act as legislative vehicles for the ongoing debate about how to reduce federal spending and likely will come into play as Congress addresses the issues of increasing the debt limit. The Republican leadership in the House will certainly use these or similar measures as bargaining chips with the White House to force spending cuts in exchange for their support on raising the debt limit.

The House and Senate calendars diverge over the next few weeks. The House starts with general organizing committee meetings over the next two weeks and has scheduled a break for the week of January 31st. The Senate, though technically in session, does not return for regular business until January 24th and does not have another scheduled break until the Presidents Day recess starting February 21st.