Saturday, April 11, 2009
This week in Washington, 4/10/09
Congress is in the middle of its two-week spring recess, so it gives us an opportunity to take a little longer view of the budgets passed by the House and Senate. This week’s update is longer than usual because it give more in-depth explanations of the issues that will be part of the conference discussion.
PRIORITIES FOR THE BUDGET CONFERENCE
The budget resolutions passed by the House and Senate both preserve Congress’s ability to address the President’s key initiatives. The next step in the process will be to resolve the differences in a conference committee. We actually expect the final resolution to be worked out behind closed doors over the next several weeks by a small group of Budget Committee Democrats in consultation with their Leadership and the White House. Since no Republicans supported the resolution in committee or on the floor, they are only expected to be part of the final, formal conference meeting which will occur after all the decisions have been made.
OVERVIEW OF THE RESOLUTIONS
The House and Senate budget resolutions are similar in a number of key ways. Deficits will fall substantially over the next five years under both versions. They do remain high relative to the economy by historical standards because of the recession and financial system breakdown. But the key point is that under both plans, deficits over the next five years would be lower than the deficits that would occur if current policies remain unchanged.
Both the House and Senate resolutions assume that tax cuts that benefit middle-income taxpayers enacted in 2001 and 2003 (the 10 percent bracket, the child tax credit and marriage penalty relief) will be extended without being offset.
Both the House and Senate resolutions facilitate reforming the nation’s health care system to move toward universal insurance coverage and slow the rate of growth of health care costs system-wide. They also pave the way for enacting other major investments such as improving education and facilitate enactment of comprehensive climate change legislation.
Discretionary funding: The final budget resolution will set the total amount of funding available to the Appropriations committees for discretionary programs for the next fiscal year, 2010. The good news is the Senate rejected all amendments to cut domestic discretionary funding below the cuts made by the Budget Committee.
The President would increase domestic discretionary funding by 5.4 percent over last year, excluding inflation. Congress was concerned about increasing spending again after having just enacted increases in the Omnibus Appropriations for 2009. So the House cut domestic discretionary by $7 billion – to a 5 percent increase over last year after adjusting for inflation. The Senate cut domestic discretionary even further -- by $15 billion below the President, a 3 percent increase over last year after adjusting for inflation.
These increases should be put into perspective. The President’s budget includes one-time funds for decennial census. It also includes a technical adjustment for the FHA loan guarantee program that does not reflect a change in policy. Much of this increase reflects conditions in the mortgage industry. Without these two policies, the House increase is only 3.5 percent after adjusting for inflation and the Senate increase is only 1.5 percent after adjusting for inflation.
The President is proposing to increase veterans spending by more than 10 percent. The House and Senate budget resolutions want to increase funding for veterans programs even further, to an 11.5 percent nominal increase over last year.
Once you factor in those increases, funding for all other discretionary programs would increase by just 0.6 percent under the Senate budget resolution (adjusted for inflation). That leaves very little for investments in programs that have been significantly underfunded in recent years, like Head Start, education, housing, public health, and more. If members believe increases are needed in some of these other areas, they need to build support higher discretionary funding levels for 2010 than are assumed by the Senate.
Finally, domestic discretionary spending is not the cause of the deficit problem. While total discretionary spending has increased significantly in recent years, it has been overwhelmingly for defense and homeland security. Domestic discretionary spending has grown only slightly since 2001 after inflation is taken into account. Even after the increases provided in the Omnibus Appropriations bill for 2009, total domestic discretionary funding has increased just 1.1 percent per year on average since 2004 (adjusted for inflation.) A number of key programs that invest in the education and well-being of children and families have been significantly underfunded as a result of this budget policy.
Reconciliation instructions: The House plan includes reconciliation instructions to three committees that would facilitate passage of legislation to enact Obama’s key initiatives in health care, education, and possibly climate change. The Senate resolution includes no reconciliation instructions so this issue will need to be resolved in conference. Every President in recent memory, including both Presidents Bush, has used this process in their first years to enact major domestic initiatives.
The House resolution suggests reconciliation would be used to facilitate consideration of legislation to reform health care and to make improvements in student financial aid. But because the Energy and Commerce and Ways and Means Committees both received instructions in the House, it is conceivable that the procedure could be used for climate change legislation if it’s not used for health reform. Including the instructions in the final budget resolution does not require that the reconciliation process be utilized.
Legislation that is brought to the floor as a reconciliation measure is protected by special rules and procedures, particularly in the Senate. The types of amendments that can be offered are limited, and the time for debate is predetermined. This means a Reconciliation bill cannot be filibustered, and only requires a simple majority of 51 votes to pass, rather than the 60 needed to shut down a filibuster.
The Senate resolution did not include Reconciliation instructions mainly because Republicans, especially those on the Finance and HELP Committees who are engaged in bipartisan discussions on health reform, labeled the move as partisan and an attempt to shut them out of the process.
Taxes/Estate tax: The House and Senate resolutions both assume most of the tax cuts proposed by the President, including the extension of the tax cuts first enacted in 2001 and 2003 for everyone earning $250,000 or less. The House plan contains $613.2 billion in unpaid-for tax relief over five years, while the Senate plan as it came out of Committee contained $825 billion. The Senate also adopted several problematic tax-related amendments during floor consideration that could lead to more tax cuts and that will need to be addressed during conference. Next week’s update will contain a more detailed explanation of the Estate tax amendments adopted in the Senate.
Other Senate tax amendments: The Senate also adopted amendments to exempt various groups, particularly small businesses, from the return in 2010 of the 36 and 39.6 percent brackets for those earning $250,000 or more. The Senate also adopted several amendments that would make it harder to enact some of the President’s revenue proposals. We’re fairly confident these amendments will be dropped in conference. But, as with the estate tax, the votes on some of these amendments show us we have work to do to persuade members that some revenue increases must be part of the equation for restoring fiscal responsibility and improving fairness in the tax code.
PRIORITIES FOR THE BUDGET CONFERENCE
The budget resolutions passed by the House and Senate both preserve Congress’s ability to address the President’s key initiatives. The next step in the process will be to resolve the differences in a conference committee. We actually expect the final resolution to be worked out behind closed doors over the next several weeks by a small group of Budget Committee Democrats in consultation with their Leadership and the White House. Since no Republicans supported the resolution in committee or on the floor, they are only expected to be part of the final, formal conference meeting which will occur after all the decisions have been made.
OVERVIEW OF THE RESOLUTIONS
The House and Senate budget resolutions are similar in a number of key ways. Deficits will fall substantially over the next five years under both versions. They do remain high relative to the economy by historical standards because of the recession and financial system breakdown. But the key point is that under both plans, deficits over the next five years would be lower than the deficits that would occur if current policies remain unchanged.
Both the House and Senate resolutions assume that tax cuts that benefit middle-income taxpayers enacted in 2001 and 2003 (the 10 percent bracket, the child tax credit and marriage penalty relief) will be extended without being offset.
Both the House and Senate resolutions facilitate reforming the nation’s health care system to move toward universal insurance coverage and slow the rate of growth of health care costs system-wide. They also pave the way for enacting other major investments such as improving education and facilitate enactment of comprehensive climate change legislation.
Discretionary funding: The final budget resolution will set the total amount of funding available to the Appropriations committees for discretionary programs for the next fiscal year, 2010. The good news is the Senate rejected all amendments to cut domestic discretionary funding below the cuts made by the Budget Committee.
The President would increase domestic discretionary funding by 5.4 percent over last year, excluding inflation. Congress was concerned about increasing spending again after having just enacted increases in the Omnibus Appropriations for 2009. So the House cut domestic discretionary by $7 billion – to a 5 percent increase over last year after adjusting for inflation. The Senate cut domestic discretionary even further -- by $15 billion below the President, a 3 percent increase over last year after adjusting for inflation.
These increases should be put into perspective. The President’s budget includes one-time funds for decennial census. It also includes a technical adjustment for the FHA loan guarantee program that does not reflect a change in policy. Much of this increase reflects conditions in the mortgage industry. Without these two policies, the House increase is only 3.5 percent after adjusting for inflation and the Senate increase is only 1.5 percent after adjusting for inflation.
The President is proposing to increase veterans spending by more than 10 percent. The House and Senate budget resolutions want to increase funding for veterans programs even further, to an 11.5 percent nominal increase over last year.
Once you factor in those increases, funding for all other discretionary programs would increase by just 0.6 percent under the Senate budget resolution (adjusted for inflation). That leaves very little for investments in programs that have been significantly underfunded in recent years, like Head Start, education, housing, public health, and more. If members believe increases are needed in some of these other areas, they need to build support higher discretionary funding levels for 2010 than are assumed by the Senate.
Finally, domestic discretionary spending is not the cause of the deficit problem. While total discretionary spending has increased significantly in recent years, it has been overwhelmingly for defense and homeland security. Domestic discretionary spending has grown only slightly since 2001 after inflation is taken into account. Even after the increases provided in the Omnibus Appropriations bill for 2009, total domestic discretionary funding has increased just 1.1 percent per year on average since 2004 (adjusted for inflation.) A number of key programs that invest in the education and well-being of children and families have been significantly underfunded as a result of this budget policy.
Reconciliation instructions: The House plan includes reconciliation instructions to three committees that would facilitate passage of legislation to enact Obama’s key initiatives in health care, education, and possibly climate change. The Senate resolution includes no reconciliation instructions so this issue will need to be resolved in conference. Every President in recent memory, including both Presidents Bush, has used this process in their first years to enact major domestic initiatives.
The House resolution suggests reconciliation would be used to facilitate consideration of legislation to reform health care and to make improvements in student financial aid. But because the Energy and Commerce and Ways and Means Committees both received instructions in the House, it is conceivable that the procedure could be used for climate change legislation if it’s not used for health reform. Including the instructions in the final budget resolution does not require that the reconciliation process be utilized.
Legislation that is brought to the floor as a reconciliation measure is protected by special rules and procedures, particularly in the Senate. The types of amendments that can be offered are limited, and the time for debate is predetermined. This means a Reconciliation bill cannot be filibustered, and only requires a simple majority of 51 votes to pass, rather than the 60 needed to shut down a filibuster.
The Senate resolution did not include Reconciliation instructions mainly because Republicans, especially those on the Finance and HELP Committees who are engaged in bipartisan discussions on health reform, labeled the move as partisan and an attempt to shut them out of the process.
Taxes/Estate tax: The House and Senate resolutions both assume most of the tax cuts proposed by the President, including the extension of the tax cuts first enacted in 2001 and 2003 for everyone earning $250,000 or less. The House plan contains $613.2 billion in unpaid-for tax relief over five years, while the Senate plan as it came out of Committee contained $825 billion. The Senate also adopted several problematic tax-related amendments during floor consideration that could lead to more tax cuts and that will need to be addressed during conference. Next week’s update will contain a more detailed explanation of the Estate tax amendments adopted in the Senate.
Other Senate tax amendments: The Senate also adopted amendments to exempt various groups, particularly small businesses, from the return in 2010 of the 36 and 39.6 percent brackets for those earning $250,000 or more. The Senate also adopted several amendments that would make it harder to enact some of the President’s revenue proposals. We’re fairly confident these amendments will be dropped in conference. But, as with the estate tax, the votes on some of these amendments show us we have work to do to persuade members that some revenue increases must be part of the equation for restoring fiscal responsibility and improving fairness in the tax code.
