Federal Relations

April 11, 2011

FY11 End Game

Federal government is now operating under another one-week continuing resolution (CR) intended to give lawmakers time to debate and approve the larger agreement they reached late Friday night.  The so-called “bridge” CR was cleared by Congress shortly after midnight Friday, immediately after a deal was reached on funding for the remainder of FY11, thereby preventing a government shutdown.  Consistent with recent practices regarding short-term CR extensions, it also cut $2 billion from current-year spending, mostly from transportation and housing programs.  

The FY11 spending agreement should be released Monday, with House floor action Wednesday and Senate action to follow.  Under the budget deal, FY11 spending would be cut by about $38 billion and none of the most controversial policy riders would be included.  The cuts would come from both the discretionary and mandatory side, with almost $18 billion in reductions in mandatory spending and $20 billion in discretionary spending cuts — $12 billion of which has already been enacted through discretionary cuts in the last three short-term CRs.  More than $1 billion of the discretionary cuts will come from an across-the-board reduction affecting all programs except Defense. 

The battle over fiscal 2011 spending has been viewed as a small-scale preview of larger fights to come, including those on the fiscal 2012 budget and spending, and one even sooner on the national deficit. Republicans have repeatedly said they intend to use the need to raise the nation’s debt limit as a “leverage point” to demand more spending cuts or substantial controls on future spending. The efforts on current-year spending may have provided a useful getting-to-know-you exercise for the three primary negotiators in those upcoming battles: President Obama, Speaker Boehner, and Senate Majority Leader Harry Reid, D-Nev.

FY12 Battle Begins

After an agreement was reached late Friday on funding for the current year, policymakers are now looking ahead at the larger and more explosive budget issues that must be addressed, including FY12 spending and raising the debt limit.

Beginning on Thursday, the House plans a two-day debate of their FY12 budget blueprint and the contentious issue of long-term debt reduction.  The budget would cut spending, compared with Obama’s FY12 proposed budget, by $6.2 trillion over 10 years, and shrink cumulative deficits by $4.4 trillion.  It also would cut the current top tax rate from 35 percent to 25 percent for families and companies, and transform traditional Medicare and Medicaid benefits respectively into premium support payments and state block grants.

In the Senate, senior Democrats say the budget debate in that chamber will be delayed at least until after they return May 2 from their two-week recess.