Federal Relations

April 5, 2011

Shutdown, FY12, and a Balanced Budget Amendment…

Shutdown Countdown…

Late last night, House Republicans announced that they’re prepared to pass a new one-week continuing resolution (CR) extension with an additional $12 billion in cuts to FY11 unless Democrats “get serious about making real spending cuts on a long-term bill” for the remainder of the year.  The two parties have been negotiating over proposed cuts for the year, with Republicans favoring the $61.5 billion in cuts included in HR 1 as passed by the House and Democrats grudgingly agreeing on a $33 billion level of cuts. 

The surprise move by Republicans to approve yet another CR is the latest threat to either force action on the FY11 budget or prepare for a government shutdown at the end of this week.  Current stopgap funding expires Friday night, and with only a few days remaining it would be very difficult for legislation incorporating any final agreement to be drafted and enacted by that time.  The Washington Post reported yesterday that OMB has instructed federal agencies to begin preparing for a possible shutdown.  House leaders are also preparing for a government shutdown as they plan to distribute a pamphlet about the mechanics of a partial congressional work-stoppage to all lawmakers’ offices later this morning.

A draft bill being prepared by the House Appropriations Committee last night would fund the Defense Department through the end of FY11 but require $12 billion in new cuts as the price for keeping domestic agencies and the State Department operating another week.  The $12 billion is intended as a further down payment toward a final deal, just as $10 billion in cuts were promised under two prior CRs.  But Boehner has also raised the ante by demanding total cuts of more than the $33 billion target that was the focus of talks over the weekend.

Senate Democrats will likely oppose the proposed one-week CR extension but if they blocked the measure they could be held responsible for shutting down the government.  House Appropriations released a summary of the new one-week stopgap measure, which is designed to appeal to GOP conservatives by providing deeper cuts than prior CR extensions (cutting $12 billion in discretionary spending for the one week, versus $2 billion a week under the last two extensions).  

The House Speaker, Senate Majority Leader, and the two House and Senate Appropriations chairmen will meet today at the White House with President Obama and Vice President Biden to try to move negotiations forward – even in light of the House Republican’s new offensive on the FY11 process.


As if the FY11 process isn’t exciting enough, the House Budget Committee Chair will roll out an FY12 blueprint today that could slash up to $6 trillion in the next 10 years from federal spending, reforms and cuts entitlements, and overhauls sections of the tax code.  The Republican budget is expected to include several major proposals: reduction of the corporate tax rate to 25 percent; elimination of corporate tax loopholes; spending cuts with enforceable caps; reforms to “save critical health and retirement programs”; health reform that “repeals and defunds last year’s health reform law,; and a promise to restore “America’s exceptional promise,” according to a draft summary of the budget.

Sources said Ryan plans to lower spending below FY08 levels, a significant cutback but not as dramatic as the previous discussion to cut down to FY06 levels.  Other plans include block grants for Medicaid, shifting control to the states. Those on Medicare would get to choose among competing private insurance plans.  Additionally, the budget proposal is expected to eliminate funding for the health care law, likely by stopping the expansion of Medicaid and subsidies for private health insurance.

The bill will likely get marked up in committee Wednesday, and the Rules Committee plans to outline the parameters for debate on Tuesday or Wednesday of next week. At that point, the House is expected to pass the resolution and send it to the Senate.

Balanced Budget Amendment

In related news, House Republicans are looking to attract support from enough lawmakers in both parties to move a balanced-budget amendment to the US Constitution in conjunction with coming debates over the budget and the debt limit.  The House GOP proposal would require the President to submit a balanced budget, require Congress to enact balanced budgets each year but allow an annual deficit to occur if Congress specifically approves by a three-fifths majority vote of each chamber, and require three-fifths majority votes in order to raise the nation’s statutory debt limit.  The measure would allow a waiver of restrictions if the nation is at war or involved in a major military conflict.  A constitutional amendment requires two-thirds votes of both chambers, and then must be ratified by at least 38 states.

All 47 Senate Republicans last week joined together to back their own proposed balanced-budget constitutional amendment that also would cap federal spending at 18 percent of gross domestic product.  Government spending now stands at about 24 percent of GDP, and has historically run at about 20 percent of GDP.  Similar to the House proposal, it would direct the president to submit, and Congress to enact, a balanced budget annually; allow a deficit to occur only by supermajority votes of the House and Senate (a two-thirds vote, versus a three-fifths vote in the House measure); waive the restriction in times of declared war (although a three-fifths vote would be needed to run a deficit when there is a military conflict without a declaration of war); and require three-fifths votes of both chambers to raise the debt limit.  The Senate Republican proposal would also require two-thirds votes of both chambers to raise taxes.