Category: On the Hill

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.