October 21, 2014

Washington Budget Report: Apr. 19, 2010

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Senate Budget Committee Announces Plans To Move Forward on Budget Resolution

The Senate Budget Committee announced today that it would mark up a budget resolution beginning on Wednesday. At press time, however, the House was still considering whether or not to go forward with a budget resolution this year.

After the official April 15 deadline passed for a finished budget resolution, The Concord Coalition strongly urged Congress not to abandon its responsibility to pass such a measure. The Congressional Budget Office (CBO) is forecasting baseline deficits totaling $6 trillion over ten years and $9.8 trillion in the President’s budget. In Concord’s view, abandoning the budget process in the face of large deficits as far as the eye can see would represent the height of fiscal irresponsibility. 

Election years have become increasingly problematic for the budget. In 1998, 2002, 2004 and 2006 Congress failed to pass budget resolutions. However, in all but one of those years the House and Senate still managed to pass their own versions of a budget resolution. Failure to pass a budget resolution in the House would be unprecedented. The Senate has only failed in 2002. 

Without a budget resolution, Congress would have no framework for imposing tough choices on the budget. It would have to resort to backdoor “deeming” resolutions to establish discretionary budget limits, which would signal a lack of commitment to multiple-year fiscal restraint. Congress would also lose the opportunity to pass deficit reduction measures through the reconciliation process, which can only be established in a joint budget resolution.

Six-month Treasury Estimates Show Tentative Improvement Over Last Year

The Treasury Department has released preliminary spending and revenue totals for the first half of the fiscal year showing a slight improvement in the deficit compared to the same period in FY 2009. However, it is too soon to know whether the trend will hold up. Much will depend on whether the April receipts show signs of economic recovery.

For the first six months of FY 2010, Treasury estimates that the government recorded a deficit of $717 billion. That would be $64 billion less than the deficit for the same period last year. 

In March, the deficit was $65 billion, which is $126 billion less than in March 2009. Analysis by the Congressional Budget Office and other experts has suggested that the difference is largely due to revisions in the projected costs of the Troubled Asset Relief Program (TARP) and the fact that last month had one more business day than March 2009. 

In a hopeful sign, revenues were up in March for the second month in a row compared to 2009. On the other hand, outlay totals show the continuing effects of the recession. Two major safety net programs, unemployment compensation and Medicaid, continue to show high year-over-year growth.

Traditionally the administration does not officially revise the deficit projections in the President’s budget until the Mid-Session Review, which is typically released in the summer.

Even if the administration's projections were revised, deficits are still likely to continue at record levels that are fiscally unsustainable over the long-term. 

Use of Supplemental Spending Bills Has Increased Significantly in Recent Years, Often to Evade Limits

One of the first post-recess priorities for the Appropriations Committees in Congress will likely be considering legislation for “supplemental” spending in the current fiscal year. Supplemental spending bills are usually considered each spring and are intended to provide funding for wars, natural disasters and other unforeseen events that could not be funded through the regular appropriations process.

The President’s budget included a request for $47 billion in supplemental funding for war-related activities, disaster relief and other purposes. Since then, the President has also requested additional supplemental funding for purposes such as providing aid to Haiti after the earthquake there.

In recent years, supplemental spending has increased significantly. While many of the items in supplemental legislation clearly qualify as emergencies, the bills also frequently include other items for the sole purpose of evading the budget resolution’s spending limits.

Congress Extends COBRA and Unemployment Benefits, Considers Additional Jobs-Related Legislation

Unemployment & Jobs Legislation

Prior to the April recess, the Senate failed to approve a month-long extension of unemployment and COBRA health insurance benefits. Upon returning, however, the Senate reached agreement on a two-month extension of the benefits. The House then approved the measure, and it was quickly signed by President Obama.

Looking ahead, House and Senate leaders hope to reach agreement on a longer-term extension of unemployment benefits, which would avoid the need for more of the temporary measures that have been used. That legislation (H.R. 4213) would also include extensions of tax cuts that Congress routinely approves annually.

By classifying benefit extensions as emergency spending, Democratic leaders have avoided pay-as-you-go (PAYGO) constraints that would otherwise have prohibited deficit-financing for new spending. Some Republicans, particularly in the Senate, have argued that legislation to extend unemployment benefits should be offset with spending cuts in other programs.

Deficit spending can stimulate the economy during economic downturns, and the Congressional Budget Office has estimated that extending unemployment benefits is one of the most cost-effective methods of stimulus. As the economy continues to improve, however, Congress and the President should avoid classifying legislation as “emergency” spending simply to avoid making the hard trade-offs required by PAYGO rules.