Category: Legislation

The Association of American Universities (AAU) released the following outlook today for the appropriations process scheduled to resume next week when congress returns from recess:  

The Senate Appropriations Committee will begin moving its FY12 bills next week as soon as the Senate returns from the August recess on September 6.  Two bills will be marked up that day in their respective subcommittees: Energy and Water and Homeland Security.  CQ Today reports that the full committee is expected to meet shortly after the subcommittee markups to adopt the FY12 spending cap and allocate funding among the panel’s 12 subcommittees.  Just one funding bill, Military Construction-Veterans, was approved by the Senate before the recess. 

 Senate Democratic leaders delayed approval of an FY12 budget resolution, which sets the discretionary spending ceiling for the fiscal year, because they could not gain majority support for any particular level of spending.  The issue was resolved on August 2 with enactment of the Budget Control Act, which included a discretionary spending total of $1.043 trillion for FY12.  That is $7 billion less than the FY11 level, but about $23 billion more than the level in the House-passed FY12 budget resolution.  

Earlier this year, the House passed an FY12 Budget Resolution that cut $30 billion from discretionary spending in FY11, and then approved six of its 12 appropriations bills based on those numbers.  The remaining bills include Commerce-Justice-Science, which funds the National Science Foundation and NASA, and Labor-HHS-Education, which funds the National Institutes of Health and student aid.

At this writing, House Republican leaders have not said how they will move forward on the remaining FY12 bills in light of the increased spending total, but they have expressed support for abiding by the higher overall number.  House Majority Leader Eric Cantor (R-VA), said in a memorandum to his Republican colleagues on August 17, “While all of us would like to have seen a lower discretionary appropriations ceiling for the upcoming fiscal year, the debt limit agreement did set a level of spending that is a real cut from the current year level.  I believe it is in our interest to enact into law full-year bills at this new lower level.”  House Appropriations Committee Chairman Hal Rogers (R-KY) stated his commitment to maintaining “the responsible 2012 spending level agreed to by the House, Senate, and White House under the recent debt ceiling agreement.” 

 While the Senate appropriations process is finally moving forward, the new fiscal year is just one month away, so there seems little chance that the House and Senate can approve all of their bills and reconcile them with one another by October 1.  The more likely scenario is congressional approval of one or more continuing resolutions to sustain funding into the new fiscal year, followed by some type of omnibus appropriations package.

The House approved the deficit reduction bill last night by a vote of 269-161; 95 Democrats and 66 Republicans voted against the measure.  Congressmen Adam Smith and Jim McDermott voted no, while the remaining members of our delegation voted in favor of the bill. The Senate is expected to clear deficit reduction legislation at noon today.  And while it is not on the President’s schedule for today, he is largely expected to sign the bill before the close of business.  With his signature, a six-month-long battle over raising the debt ceiling ends but the next round begins with future fights over spending, taxes, and entitlement programs.  

With that vote, the House went into recess last night and is not expected back in DC until after Labor Day.  The Senate will join their House colleagues once they conclude their vote.

As I reported yesterday, the legislation would cap discretionary spending for FY12 and FY13, effectively freezing it at current levels and only adjusting it to match historical levels of inflation (2.2 percent) through 2021. It would also create a joint congressional committee tasked with finding between $1.2 trillion and $1.5 trillion in new savings, and sending a proposal to the House and Senate floor for guaranteed votes by December 23^rd.  If those savings are not enacted, sweeping automatic budget cuts would be triggered.

Democrats are hopeful that the debt limit deal might generate more spending for domestic programs, while Republicans are concerned about cuts in defense.  The allocations would reverse cuts set in April by the House Republicans’ budget target, which would have lopped $30 billion from discretionary spending compared with FY11.  The Labor-HHS-Education and Transportation-HUD bills had been set to include the majority of those cuts and have yet to be unveiled in the House.  The extra funds could ease the path of those bills when they are marked up in September.  With an allocation to work from, Senate appropriators also hope to begin moving bills, which are almost certain to differ from their House-passed counterparts.

The framework for a final deal to raise the debt ceiling is finally on the table.  The House and Senate will continue working today with a goal of pushing a bill through both chambers by tonight.  The leadership of both parties in both chambers have also agreed to commence their August recess as soon as the bill is approved. 

The following is a summary of the final deal:

Debt Ceiling Increase:  The current $14.3 trillion ceiling on total federal borrowing would be increased by an amount sufficient to allow the Treasury Department to operate beyond the 2012 election and into 2013.  That would be accomplished in two steps.  The debt limit would be increased by $900 billion immediately.  Then, a second increase of between $1.2 trillion and $1.5 trillion would be available at the President’s request.  However, exactly how that would happen is unclear.  Earlier measures would have provided an immediate increase and phased additional increases that would be subject to a congressional resolution of disapproval.  To block a debt limit increase, such a resolution would presumably have to be enacted over the President’s veto, requiring two-thirds majority votes in both chambers.

Spending Cuts — Round One:  An immediate reduction in the deficit of roughly $1 trillion over 10 years would be enacted.  Most details have not been made public, but such a cut would probably be accomplished through specific caps on appropriations for each year from FY12 through FY21.  The agreement is expected to set discretionary spending caps of $1.043 trillion for FY12 and $1.047 trillion for FY13, with a “firewall” between defense and non-defense spending — meaning domestic accounts could not be raided to bump up security spending.  The amount for FY12 is about $24 billion larger than the amount approved by the House-adopted budget resolution.  It is unclear if the House will adjust their appropriations bills to account for the higher number (not likely).

Spending Cuts — Round Two:  A special joint committee would be created to recommend specific ways to reduce the deficit by an additional $1.8 trillion by 2021.  This committee, composed of three Democrats and three Republicans from each chamber, was a part of earlier plans from both parties.  The panel would report its recommendations to both chambers, and the recommendations would be subject to up-or-down votes without amendment.  Earlier versions required the committee to report by November 23^rd and required the House and Senate to act by December 23^rd.  Presumably all aspects of the federal budget will be on the table, including entitlement cuts and revenue increases.  It is not clear if the committee will be specifically authorized to consider an overhaul of the tax code.

Enforcement Triggers for Panel’s Recommendations:  If the enacted recommendations from the joint committee do not produce at least $1.2 trillion in savings, a process for automatic spending cuts would be triggered that is similar to the system of spending “sequesters” enacted as part of the 1985 Gramm-Rudman anti-deficit law and the 1997 deficit-reduction law.  Any sequester would be equal to the portion of the $1.2 trillion savings target that was not achieved.  It would apparently fall equally on defense and non-defense accounts, including some entitlement spending.  Programs targeting low-income individuals and families would largely be exempt from the sequester, as they were under Gramm-Rudman.  Medicare cuts would be restricted to no more than 2 percent of the program’s outlays, and would only affect payments to providers, not to beneficiaries.  The idea is to provide a strong incentive for the committee not to deadlock in trying to make recommendations and for the two chambers to enact them.  Democrats did not win agreement to incorporate a tax increase as part of the enforcement trigger mechanism.

Entitlement Cuts:  The special joint committee is likely to look closely at entitlement spending to achieve its deficit reduction goals.  This could very likely include changes to the Pell Grant program.  Those spending cuts would be subject to tough negotiations over the next four or five months.  As noted, if a sequester is triggered to enforce mandated spending cuts later this year, some restricted automatic cuts in Medicare spending might occur.  It is unclear what other entitlement spending might be subject to a sequester.

Taxes:  The plan does not include any immediate increase in revenue, although the joint deficit-reduction committee may consider several forms of revenue increases.  Earlier in the negotiations, the House Speaker proposed an increase of $800 billion in revenue.  Such an increase might come either from the elimination of tax breaks or by not renewing the Bush-era tax cuts for high-earners, or both.  In addition, a comprehensive overhaul of the tax code might be structured to yield a net revenue increase.

Balanced-Budget Amendment:  The plan requires both the House and the Senate to vote on a proposed balanced-budget amendment to the Constitution by the end of the year.  Unlike the proposal approved by the House last week, lawmakers would not have to adopt this amendment — and send it to the states for ratification — for the debt limit increase to take effect.

The House Appropriations Committee today released their FY12 State & Foreign Operations Appropriations bill, which will be considered in subcommittee tomorrow.  The bill includes a total of $39.6 billion in regular discretionary funding, which is $8.6 billion or 18 percent below FY11 levels and $11.23 billion below the President’s FY12 request.  Included in these reductions are cuts back to the FY08 levels or below for certain operations and assistance accounts.  

Bill Summary:

International Security Assistance – The bill provides $8 billion in discretionary funding for international security assistance, a decrease of $61 million from last year’s level and $167 million from the President’s request.  This includes funds for international narcotics control, nonproliferation and anti-terrorism programs, peacekeeping operations, foreign military financing, and international military education and training.  

Bilateral Assistance – The legislation contains a total of $17.7 billion for bilateral economic assistance, a decrease of $3.5 billion below last year and $4.8 billion below the President’s request. This includes funding for global health programs, international disaster assistance, refugee assistance, the Peace Corps, the Millennium Challenge Corporation, and various economic and democracy promotion programs.

Multilateral Assistance – The legislation provides $1.6 billion for multilateral assistance, a reduction of $729 million below last year and $2.1 billion below the President’s request. This includes significant cuts to many international organizations and programs, including the World Bank, the Global Environment Facility, and several other international financial institutions.  In addition, the bill eliminates funding for the Clean Technology Fund and the Strategic Climate Fund.

Export and Investment Programs – The bill provides $266 million for export assistance programs, a reduction of $84 million from the President’s request.  The Trade and Development Agency – which promotes US trade interests abroad – is level funded at $50 million, the same as last year.

State Department Operations and Related Agencies – The bill contains a total of $11.9 billion in discretionary funding for operational costs of the State Department and related agencies – a decrease of $3.9 billion below last year’s level and a $3.1 billion below the President’s request.  This includes funding for programs such as diplomatic and consular affairs, embassy security and operations, assessed contributions to international organizations, and international broadcasting.  The bill also eliminates temporary pay raises for overseas officers.  

United States Agency for International Development (USAID) Operations – The bill contains $1.04 billion for USAID – a reduction of $488 million from last year’s level and $705 million below the President’s request.  The bill halts new hiring at USAID and stops expansion of facilities overseas associated with that hiring.

Policy Riders:

Global Gag Rule (“Mexico City Policy”) – A policy that prohibits all federal funding from going to any organization that uses their own funds to perform abortions, promote legalization, or provide counseling including these services.

UN Human Rights Council – Prevents the US from influencing the council by defunding our participation. 

UN Peacekeeping Activities – Caps US contributions to UN Peacekeeping Activities at 25 percent.  This abrogates our treaty agreement with the UN.  

Defunds UNFPA – Blocks US contributions to the UN Population Fund.

Climate Change – Cuts funding to accounts and programs across the bill that address global climate change.  

International Monetary Fund (IMF) – Rescinds funds appropriated to the IMF to shore up its role as the first responder to global financial crises.

Bipartisan deficit reduction talks broke down again over the weekend and congressional leaders are now writing their own proposals to avoid a government default in eight days (August 2nd).  Lawmakers could vote on their separate plans later this week, which may form the basis for a compromise.  The House Speaker will present a plan to House Republicans today with the goal of having legislation filed later in the day to allow a vote as early as Wednesday.  This proposal calls for a two-step process to raise the $14.3 trillion debt ceiling and cut spending.  The first debt limit increase, which seems likely to cover government borrowing through at least the end of the calendar year, would rest on discretionary spending caps for fiscal years 2012 and 2013, which could yield $1 trillion or more in savings over the next decade.  The plan also would create a bicameral deficit committee that would recommend more budget cuts, which would then get a vote in the House and Senate.  The second installment of increased borrowing authority will likely be contingent on Congress clearing the committee’s recommendations for additional spending cuts of $3 trillion to $5 trillion over the next decade.  The White House and Democrats would likely oppose that plan.

Meanwhile, the Senate Majority Leader does not appear opposed to two rounds of spending cuts or a bicameral committee, but has joined the White House in seeking a debt limit increase that would last through the 2012 elections and in opposing a short-term increase.  His plan is likely to call for a $2.7 trillion increase in the debt ceiling with equal spending cuts without any changes in entitlements programs or increases in revenues.  The time frame for a Senate vote is not clear, but could come by the end of the week.   The White House seems likely to back the plan that also could gain some GOP support in the Senate, but it would face resistance in the House if entitlement cuts are not part of the deal.  Details of the spending cuts have yet to be released.

Both the House and Senate proposals will likely use most of the $200 million in cuts that Vice President Biden and congressional negotiators agreed to earlier this year in deficit reduction talks, including cuts aimed at aid for needy students, such as Pell grants, and federal dollars for disadvantaged school districts.  One option that will not resurface in coming weeks is the “cut, cap and balance” plan (HR 2560) promoted by House conservatives, which the Senate rejected last Friday in a party-line procedural vote.  The bill would have made an increase in the debt limit contingent upon the passage of a balanced-budget constitutional amendment and deep spending cuts.  The measure’s defeat had been expected, but a vote on the plan was intended to show conservatives’ support for deep cuts, and was seen as a necessary step toward reaching a compromise on deficit reduction.