House Republicans have released a draft of their six-month continuing resolution (CR) that contains few policy riders and would increase spending slightly for most federal agencies by just over half a percent for the first half of FY2013. The House plans to vote on the CR (HJ Res 117) this Thursday, and would run through March 27, 2013 and its spending reflects the $1.047 trillion cap set for discretionary spending set in the 2011 Budget Control Act (PL 112-25). The increased spending would be divided up as a roughly 0.6 percent across-the-board increase for nearly all federal agencies. Some exceptions would carve out additional dollars for covering the costs of the presidential inauguration, while the current pay freeze for federal employees would remain intact. The CR also would provide increased dollars for fighting wildfires and addressing a backlog of disability claims at the Veterans Affairs Department, along with allowing the launch of new weather satellites to move forward.
Author: Christy Gullion
Congress Back to Work
Congress is back in session this week after the long August break and political party conventions. There are few legislative priorities on the agenda before Congress breaks again at the end of the month through the November elections.
This week, the House will release and then vote on a six-month continuing resolution (CR) for FY2013, one of the few items that lawmakers must complete before returning to the campaign trail. The CR would keep the federal government running from October through March. A vote could take place as early as this Thursday. House passage would send the measure to the Senate, where it would likely pass next week as lawmakers are on recess the last week of September and current funding runs out September 30th.
Federal agencies will face lean times operating under a six-month CR, as the measure will reflect the $1.047 trillion FY2013 cap set for discretionary spending by the 2011 debt deal, the Budget Control Act (PL 112-25). A recent Congressional Budget Office analysis found the CR spending would amount to an $8 billion increase, or less than one percent, over FY2012 spending. But it likely won’t translate into more dollars for agencies. As happens routinely with emergency spending laws, the Office of Management and Budget will issue instructions to agencies on how to ration, or apportion, the funds for the first half of FY2013. “Because of the nature of CRs, you should operate at a minimal level until after your regular appropriation is enacted,” OMB has said in its past guidance. Agency officials likely will be even more cautious than usual, due to the uncertainties regarding the sequester that is scheduled to take effect on January 2, 2013.
Also this week the White House is expected to release a detailed report on the effect of the sequester, the automatic, across-the-board spending cuts set to occur in January. Under the transparency law, the report must provide an estimate of the percentages and dollar amounts that would be cut from every discretionary and mandatory spending account at the program, project, and activity levels, as well as a list of accounts that are exempt from cuts. Social Security, Medicaid, and funding for military personnel are among the programs that are exempt. Congressional members hope to use the report’s details on the cuts to make the case during the lame duck session for averting those cuts. The Office of Federal Relations will post detailed information on the report and also plan to disseminate a Federal Update email to the campus community by early next week.
Economic Outlook for 2013
The Congressional Budget Office (CBO) yesterday released its updated “Budget and Economic Outlook: Fiscal Years 2012 to 2022.” According to CBO:
“For fiscal year 2012 (which ends on September 30), the federal budget deficit will total $1.1 trillion, CBO estimates, marking the fourth year in a row with a deficit of more than $1 trillion. That projection is down slightly from the $1.2 trillion deficit that CBO projected in March. At 7.3 percent of gross domestic product (GDP), this year’s deficit will be three-quarters as large as the deficit in 2009 when measured relative to the size of the economy. Federal debt held by the public will reach 73 percent of GDP by the end of this fiscal year—the highest level since 1950 and about twice the share that it measured at the end of 2007, before the financial crisis and recent recession.”
In addition, CBO projects that the nation will enter into a deep recession in 2013 if Congress fails to address the sequester and the expiring Bush tax cuts. CBO also suggests that going over the “fiscal cliff” would disrupt economic progress, reduce real GDP by 0.5 percent, and push unemployment over 9.1 percent.
The outlook is darker than the forecast the agency released in January, when CBO predicted that the fiscal cliff would trigger a modest recession in the first half of 2013, followed by a quick recovery. The expiring “extenders” package for unemployment benefits and payroll tax holiday, coupled with a weaker economy has made the 2013 outlook more dire. Reactions and analyses of CBO’s report are available from the Center for Budget and Policy Priorities, and the Bipartisan Policy Center.
Obama Calls for Compromise on Sequester
President Obama said Monday that he thinks both parties can compromise and avert the across-the-board spending cuts under sequestration that could take sizable cuts out of both defense and non-defense discretionary spending. In an interview with The Virginian-Pilot’s military editor that focused on the sequester — the 10-year, $500 billion cut to both defense and non-defense discretionary spending set to hit in January 2013 — Obama said that both Democrats and Republicans have to give to reach a deal.
Despite the President’s call for compromise on sequestration, the two parties remain deadlocked on a solution to avert the cuts, which both parties consider bad policy. Obama and Democrats have said that Republicans are protecting tax cuts for the wealthy over the defense cuts, while Republicans say that Democrats are holding the military hostage to force tax increases.
No action on this will be taken until after the November elections. And, based on past efforts to reduce the national debt, it is still unclear whether or not either party is willing to compromise to reach a middle ground or “grand bargain” on this effort. Time will tell. In the meantime, we are advising the UW community to plan for a potential of 8.4% (or more) cuts to federal grants and contracts.
Sequestration Transparency Act Signed Into Law
On August 7th, President Obama signed into law HR 5872, the Sequestration Transparency Act (PL 112-155). As previously reported on this site, in July, Congress overwhelmingly cleared the bill which requires the Administration to report, within 30 days, the effects of the automatic budget sequester at the “program, project and activity level.” The Administration will have to clarify the reductions that will result from the looming across-the-board cuts of sequestration. This information will be made public shortly after Labor Day, and should help UW and others plan for the impacts of sequestration.