Federal Relations

July 22, 2011

Debt Deal Advances While Appropriations Slows Down

Debt Limit:  President Obama and House Speaker Boehner are continuing their negotiations on a new “grand bargain” that would raise the federal debt limit by August 2nd, call for $3 trillion in spending cuts over the next decade, and promise a federal tax code overhaul next year.   The deal would be a new version of the “grand bargain” congressional leaders abandoned two weeks ago, after Republicans refused to consider revenue increases.  The latest proposal would aim to draw GOP support by not seeking any immediate increase in revenue and by putting off any changes in taxes until after 2012.  Democrats, however, expressed frustration with the emerging plan that would almost certainly require deep cuts in spending.  An agreement will likely hinge on what guarantees can be made on the proposed tax overhaul to get Democrats on board, without losing the support of House Republicans, who insist any deal that raises taxes now or in the future is a non-starter.

Earlier today, the Senate blocked the House version of a deficit reduction plan known as “Cut, Cap and Balance” on a party line 51-46 vote.   The House passed the same plan earlier this week, and the Senate rejection comes as House Speaker Boehner and President Barack Obama have already moved on to negotiations on a different deficit reduction plan.   The vote handed conservatives a chance to showcase their strategy for restricting future spending in Washington, but it faced a veto from the President, making it more of a symbolic vote for Republicans to put their mark on deficit reduction.

Unless Congress raises the debt limit by August 2nd, Treasury officials say the government will run out of money to pay its bills and default on its loans for the first time in history.   

FY12 Appropriations:   The House and Senate spending committees are waiting until September to consider any more annual appropriations bills.  The Senate has only approved one of their 12 bills, the bipartisan Military Construction-VA measure.  They have indicated that they are waiting on a budget deal that would set spending levels for the remaining 11 bills.  Senate Appropriations staff say they are working behind the scenes to draft the bills that could move quickly once a funding deal is in place.

House appropriators, who hope to have 10 of their 12 annual spending bills marked up before the break, have postponed markups set for this month on the Labor-HHS-Education and Transportation-HUD bills until September.  Those two remaining bills contain the vast majority of the GOP’s planned budget cuts of about $30 billion for FY12 and might take considerable time to move through committee, let alone the House floor.  The Office of Federal Relations continues to advocate for important programs funded through the Labor-HHS-Education bill such as NIH, HRSA, student financial aid, International Education, and others.

Once September comes, Congressional efforts will inevitably focus on stopgap measures – or continuing resolutions – to ensure funding for the new fiscal year, which begins October 1st, rather than any remaining bills.