September 1, 2014

WASHINGTON BUDGET REPORT: Feb. 2, 2009

WASHINGTON BUDGET REPORT: Feb. 2, 2009
Track 1- Economic Stimulus Package Track 2 - Completion of '09 Appropriations Track 3 - FY 2010 Budget Track 4 - Stabilizing the Financial, Housing, and Auto Sectors Track 5 - Reauthorization and Expansion of SCHIP

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Budget Process: Step-by-Step

Track 1- Economic Stimulus (Jan/Feb):  

  • Wed, Jan 28: House passed its version of economic stimulus legislation by a vote of 244-188 
  • Mon, Feb 2: Senate begins Floor consideration of $888 billion stimulus bill

Track 2 - Completion of '09 Appropriations (Jan/Feb): 

  • This week: House will consider FY '09 omnibus appropriations bill
  • Feb 13: Target date for completion of action on '09 omnibus appropriations
  • March 6: Funding for much of the Federal Government expires under the terms of the current continuing resolution (see article below)

Track 3 - FY 2010 Budget:

  • Feb 2: President is normally required to transmit the FY 2010 budget to Congress by the first Monday in February, however, this being a presidential transition year, President Obama will likely transmit a budget outline later in the month followed by details in late March or April.
  • March/April: Markup of FY 2010 Congressional Budget Resolution
  • April/May: Floor action and conference on Budget Resolution
  • May-Sept: Action on FY 2010 appropriations bills and a Budget Reconciliation Bill (if called for by the Budget Resolution)

Track 4 - Stabilizing the Financial, Housing, and Auto Sectors (Ongoing)

  • GAO releases new audit of TARP program (see below)
  • The House on Jan. 21 passed a bill introduced by Financial Services Chairman Barney Frank to require that a portion of the remaining $350 billion tranche of the TARP (Troubled Assets Relief Program) be used for foreclosure mitigation
Track 5 - Reauthorization and Expansion of SCHIP

 

  • Jan 14: House passed HR 2, the SCHIP reauthorization, 289-139. CBO Cost Estimate
  • Senate Floor action this week (S. 275)
  • SCHIP bill is primarily offset by a 61-cent-per-pack increase in the federal cigarette tax

Track 1- Economic Stimulus Package

The latest economic numbers are fueling Congress' sense of urgency in completing action on a stimulus bill. Unemployment claims have reached 4.8 million, the highest on record, and the economy shrank at a 3.8% annualized rate in the fourth quarter of 2008.

This week the Senate takes up its version of economic stimulus legislation, which totals $888 billion. By comparison, the House-passed bill is estimated to cost $820 billion. CBO cost estimate of House-passed stimulus bill       JCT revenue estimates for House-passed stimulus bill

Outlook for Senate consideration: Expect extensive debate on numerous amendments. Democratic Senate leaders will have to accommodate concerns of moderate Republicans in order to garner 60 votes to preclude a filibuster from stalling the bill.

All House Republicans voted against the House version of the stimulus bill last week (vote on H.R. 1). House Republican Leader Boehner raised concerns in a press release on Saturday that tax cuts constitute only 22% of the House-passed bill. Boehner Release

The Senate Appropriations Committee marked up its portion of the Senate stimulus package last Tuesday (Jan. 27).  Summary of Senate stimulus package

Also last week, the Senate Finance Committee marked up the tax and entitlement portions of the Senate stimulus bill.  Summary of Senate Finance Committee stimulus provisions 

As the Senate prepares to take up the stimulus bill with a House-Senate conference to follow, Members of Congress, the Administration, economists and policy analysts are engaged in an intensive debate about whether the various spending and tax provisions will be effective and meet the often cited criteria of  "temporary, timely, and targeted."

  • Some economists, including Alice Rivlin, former Clinton Budget Director and CBO Director, have argued that the bill should contain only measures that are likely to provide significant short-term stimulus -- leaving longer-term "investment" to a later bill that can be paid for over time. According to Rivlin, "The first priority is an 'anti-recession package' that can be both enacted and spent quickly, will create and preserve jobs in the near-term, and not add significantly to long run deficits....The anti-recession package should be distinguished from longer-run investments needed to enhance the future growth and productivity of the economy."  Full text of Rivlin Testimony

  • According to Congressional Quarterly, Senate Budget Committee Chairman Kent Conrad (D-ND) says a "growing number" of Senators are concerned that the Senate's economic stimulus bill fails to address the root causes of the recession, namely, toxic assets in the financial sector and foreclosures in the housing sector.  Recent Senate Budget Committee hearings

  • Senate Minority Leader Mitch McConnell (R-KY) said on Face the Nation yesterday there is a "need to exercise some fiscal discipline here."  When asked whether the Senate could pass the package in its current form, McConnell said "I would doubt it."
  • A CBO analysis of the House-passed bill estimates that while many provisions will generate significant government spending in the short-term, others will generate most of their spending after FY 2010.  Examples of stimulus provisions that would generate most of their outlays in 2009 or 2010 include Medicaid, Unemployment Benefits, Food Stamps, Army Corps of Engineers Programs, Student Aid, and Health Insurance Assistance. Examples of stimulus provisions that would generate most of their outlays after 2010 include highway construction, energy efficiency and renewable energy projects, wireless and broadband investment, and health information technology.
  • In response to Republican concerns about the marginal impact of provisions with a slow spendout rate, Obama Budget Director Peter Orszag on January 22 sent a letter to Congress stating that "our analysis indicates that at least 75 percent of the overall package (including its tax component...) will be spent over the next year and a half...."   However, CBO estimates that only  two-thirds of the House package will provide stimulus during the balance of 2009 and 2010.

  • Key differences between the House-passed and the Senate-reported measure: House provides more funding for Pell Grants, job training, Medicaid for unemployed, COBRA health coverage; military construction, highways, mass transit, R&D on renewable energy; wastewater infrastructure; purchase/rehab of foreclosed housing; and law enforcement grants. Senate provides more funding for:  Information Technology; Homeland Security. 
     
  • According to Congressional Quarterly, Senate Floor amendments may include:  a Feinstein-Murray amendment to increase public works spending by $20 - $30 billion; a Schumer amendment to increase mass transit funding by $5 billion; a Hutchison amendment to provide more funding for military construction; GOP amendments for additional tax cuts; Nelson (D-Neb) amendment to reduce "non-stimulative" spending; a Nelson amendment to add a tax credit to convert farm manure into biofuel; measures to reduce foreclosures such as allowing homeowners with good credit to refinance at 4.5 percent; a Conrad amendment to expand the first-time homebuyer tax credit; Isakson amendment to create a $15,000 housing tax credit; a Nelson-Sessions amendment to require businesses receiving stimulus money to use an electronic citizenship verification program (E-Verify); and an Inhofe amendment to increase highway funding.

Track 2 - Completion of '09 Appropriations

This week, the House is expected to file an omnibus appropriations bill for the remainder of fiscal year 2009. The bill has been negotiated between House and Senate Democrats and Republicans and will likely not require a House-Senate conference.

Reason for the omnibus bill:  Last fall, Congress completed action on only 3 of the 12 regular FY 2009 appropriations bills.

Background -- Last year's FY 2009 appropriations process was one of the worst on record. Only one FY 2009 appropriations bill made it to the House Floor.

There were two reasons for the serious disruption of the regular appropriations process. First, President Bush threatened to veto any appropriations bills that exceeded his requests, and Democrats--as reflected in the Budget Resolution--called for nearly $25 billion more than the President requested. Second, House Republicans attempted to amend appropriations bills with off-shore oil drilling amendments, strongly opposed by many Democrats.

Consequently, in late September, Congress enacted a stopgap measure to keep Federal programs operating. The stopgap measure: 

  • included detailed, full-year appropriations measures for the Departments of Defense, Homeland Security, and Veterans Affairs (based upon provisions informally negotiated by House and Senate Appropriators); and
  • included stopgap funding through March 6, 2009 for all other departments and agencies of government at FY 2008 levels.

The stopgap provision did not provide inflation adjustments for the covered agencies. However, some specific programs did receive increases: the low income home energy assistance program (LIHEAP) received a $2.5 billion increase over '08; Pell Grants for higher education received $2.5 billion over '08; and the WIC program received $1 billion over '08 to assist with nutrition for new mothers and their children.

In addition, the bill included $23 billion for disaster relief, and authorized $25 billion in loans to the auto industry to retool and develop more fuel efficient vehicles. (GM and Chrysler have since received separate bridge loans from the TARP to forestall bankruptcy.)

Following is a summary of the late September stopgap measure:

Summary: Continuing Resolution


Track 3 - FY 2010 Budget

Today being the first Monday in February, the President would normally be sending his FY 2010 budget to Capitol Hill.

However, in transition years, because the new President does not assume office until January 20th, the Administration is not expected to comply with the "first Monday" requirement. 

The Obama Administration is reportedly planning to submit a broad outline of his FY 2010 budget proposals later this month and a full budget in late March or early April. 

Click here for an overview of the congressional budget process that follows transmittal of the President's Budget.

Track 4 - Stabilizing the Financial, Housing, and Auto Sectors

Recent developments: 

Last Friday, Jan 30, GAO (Governmental Accountability Office) released its second critical report on Treasury's operation of the TARP (Troubled Asset Relief Program).  GAO found that:

"As of January 23, 2009, Treasury had disbursed about $293.7 billion of the $700 billion in program funds.... Most of the funds (about $194.2 billion) went to purchase preferred shares of 317 financial institutions under the Capital Purchase Program (CPP)....GAO’s previous report emphasized the lack of monitoring and reporting for CPP investments....In response to our recommendation, Treasury developed plans to survey the largest twenty institutions monthly to monitor lending and other activities.... While the monthly survey is a step toward greater transparency and accountability for the largest institutions, we continue to believe that additional action is needed to better ensure that all participating institutions are accountable for their use of program funds."   GAO Highlights    Full GAO Report

Click here to view WBR's Financial Crisis Timeline.

Track 5 - Reauthorization and Expansion of SCHIP

The Senate last Thursday, Jan. 29, passed a $33 billion bill to reauthorize and expand SCHIP, the State Children's Health Insurance Program.  The Senate vote was 66-32, including 9 Republicans voting for the bill.

Prior to the Senate's action, the House passed its version of the reauthorization (HR 2) on January 14 by a vote of 289-139. CBO Cost Estimate of the House-Passed bill.

The SCHIP legislation complies with House and Senate pay-as-you-go (PAYGO) rules primarily by funding the reauthorization with a 61-cent-per-pack increase in the federal cigarette tax. 

The bill would extend the program for the odd length of four-and-a-half years because the cigarette tax increase will sustain the program for that length of time.  

Former President George W. Bush vetoed a similar bill passed by the Democratic Congress in 2007.

Rather than proceeding to a House-Senate conference, the House is likely to take up and approve the Senate-passed version of the bill.