Budget and Appropriations Update

Monday, July 12, 2010

Blogs

As Congress returns from its July 4th recess, below are some of the budget stories we have been following since the last edition of the Washington Budget Report (sign up here) was published.

Before the recess, the House of Representatives passed a deeming resolution by a vote of 215-210. (For background material on deeming resolutions, a Congressional Research Service report can be found here and a Concord Coalition blog entry can be found here). The deeming resolution was included as part of the rule for the FY 2010 war supplemental and includes a $1.121 trillion discretionary spending allocation that is below the President’s request. (When the President’s proposal to convert Pell grants to mandatory spending is taken into account, the Senate Budget Committee and others have argued that the President’s request is $1.128 trillion). The House Budget Committee’s analysis can be found here. The House Budget Committee Republicans released a statement which can be found here. Articles in The Wall Street Journal and The Hill also covered many of the issues raised by both parties in the debate. Since the modern budget process was created in 1974, this is the first time that a budget resolution has not been passed by either the House or the Senate. The Concord Coalition argued that the fiscal challenges facing our nation require a real budget resolution that will set fiscally responsible revenue, spending, and deficit reduction targets and include the credible budget enforcement mechanisms needed to meet them. Washington Post columnist David Broder described the deeming resolution as a “dereliction of duty” and concluded that “Of all the times for Congress to abandon its responsibility for long-term fiscal planning, this is the worst.”

The House also passed a supplemental appropriations bill, which included FY 2010 emergency funding for military efforts in Iraq and Afghanistan. The House approved amendments adding $22.8 billion for education funding for the states, Pell grants, summer jobs, border security, emergency food assistance, and other domestic priorities to the $58.8 billion bill that the Senate passed at the end of May. According to the Appropriations Committee, the amendments included $23.5 billion in offsets: $11.7 billion in rescissions, $4.7 billion in savings from changes to mandatory programs, and $7.1 billion in increased revenues. The additional domestic funding and the offsets are expected to be contentious issues during conference negotiations with the Senate. In a letter to Senate Appropriations Chairman Dan Inouye, 13 senators objected to House offsets that would cut $800 million from education grant programs.

The House Appropriations Committee began considering the FY 2011 regular appropriations bills. Prior to the recess, subcommittees reported the Homeland Security; Commerce, Justice, and Science; Agriculture; State and Foreign Operations; Transportation, Housing and Urban Development; and Legislative Branch appropriations bills. The next steps for the bills will be consideration by the full House Appropriations Committee and on the House floor. The Senate Appropriations subcommittees have not yet reported any of the FY 2011 bills.

The House and Senate have yet to reach agreement on a package extending a variety of expiring tax and spending provisions. The Senate has considered several versions of the legislation, but has been unable to agree on a proposal that would receive the 60 votes required to end debate. Before the recess, the House passed a separate bill (H.R. 5618) including provisions to extend unemployment benefits, which CBO estimated will cost $33.9 billion.

The Congressional Budget Office released an estimate of the climate change bill drafted by Senators Kerry and Lieberman. According to CBO, enacting the legislation would increase revenues by about $751 billion over the 2011-2020 period and direct spending by $732 billion over that 10-year period. Overall, the legislation would reduce future deficits by about $19 billion over the 2011-2020 period. The estimate was covered in the Boston Globe and Politico. Earlier this year, the Environmental Protection Agency also released an analysis of the bill. The Concord Coalition has argued that when Congress considers legislation that raises nearly a trillion dollars in new revenues, the fiscal challenges facing our nation require policymakers to break the habit of simply viewing new revenues as offsets for spending. More aggressive deficit reduction should also be on the agenda. The Senate is expected to consider energy legislation before the August recess.

President Obama announced the recess appointment of Dr. Donald Berwick as administrator of the Centers for Medicare and Medicaid Services. Senate Finance Committee Chairman Max Baucus and several Republicans raised concerns about the recess appointment. House Ways and Means Committee Chair Sander Levin and Health Subcommittee Chair Pete Stark praised the appointment.

In its Monthly Budget Review, the Congressional Budget Office concluded that the federal government will record a deficit of over $1 trillion for the first nine months of fiscal year 2010. According to CBO, this is approximately $81 billion less than the deficit incurred in the first nine months of the previous year. Also, last week an International Monetary Fund report warned that the central challenge for the United States economy will be to “develop a credible fiscal strategy to ensure that public debt is put — and is seen to be put — on a sustainable path without putting the recovery in jeopardy.” The report called for increased deficit reduction and offered several policy suggestions. An article in The Hill reported on a proposal that the President’s fiscal commission is considering. Over the weekend, the commission’s co-chairs, Alan Simpson and Erskine Bowles, addressed the National Governors Association.

The Government Accountability Office released a report concluding that the Low Income Home Energy Assistance Program is at risk for fraud and improper payments. In an audit of the program in seven states, GAO identified improprieties such as applications from individuals that were deceased, incarcerated, exceeded income limits, or were otherwise ineligible for benefits. GAO recommended that the Department of Health and Human Services provide increased guidance to states to reduce the risk of fraud. In FY 2009, the budget for LIHEAP was approximately $5 billion.

Prior to the July 4th recess, the House Budget Committee held a hearing on the state of the economy. This week, the Joint Economic Committee will hold a hearing on the economic outlook that will include testimony from Dr. Christina Romer, chair of the Council of Economic Advisers. The Senate Budget Committee’s Task Force on Government Performance has scheduled hearings on government contracting and performance standards. The Senate Finance Committee is scheduled to hold hearings on Social Security and the future of individual tax rates. The House Ways and Means Social Security Subcommittee is also scheduled to hold a hearing this week on Social Security. Over the weekend, a New York Times article described tension between the Social Security commissioner and the chief actuary. CBO recently issued a report analyzing several different policy options for providing long-term financial stability for Social Security. The options included changes in the payroll tax, initial benefits, cost-of-living adjustments, and the retirement age.