|House and Senate Pass FY 2010 Budget Resolutions; Conference Action Next||Health Care Reform: Will Conferees Opt for Filibuster-proof "Reconciliation"?||Permanently Extending the Bush Tax Cuts Poses a Long-Term Risk||Other Key Provisions in the Budget Resolutions||Budget Backgrounder: "Reserve Funds"|
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Track 1- Economic Stimulus:
Track 2 - Completion of '09 Appropriations:
Track 3 - FY 2010 Budget:
Track 4 - Stabilizing the Financial, Housing, and Auto Sectors (Ongoing)
This week, the House and Senate passed their respective versions of the FY 2010 Budget Resolution (fiscal year 2010 begins October 1, 2009). The budget resolutions include a spending and revenue framework for the next 5 years.
The House passed the resolution reported by its Budget Committee by a vote of 233-196, with no Republicans supporting the budget plan and 20 Democrats opposing the plan.
Following the usual practice, the House did not permit amendments to the budget resolution, except for consideration of several complete substitute plans. The House defeated alternative plans proposed by House Republicans (137-293), the Black Caucus (113-318), and the Progressive Caucus (84-348).
The Senate passed the resolution reported by its Budget Committee (as amended on the Floor) by a vote of 55-43, with no Republicans supporting the budget plan and Democrats Evan Bayh (IN) and Ben Nelson (NE) voting no.
Discretionary Spending Levels: A key issue for the House-Senate conference on the budget resolution will be the total amount of non-emergency discretionary spending for 2010. The House-passed resolution would provide $1.089 trillion which is about $8 billion more than proposed by the Senate, but $7 billion less than requested by the President.
Following are highlights of Senate action on key amendments:
The President's Budget calls for comprehensive health care reform to rein in skyrocketing health care costs and cover the uninsured.
The President calls for a $634 billion downpayment on health care reform, funded by $316 billion in Medicare and Medicaid reforms, and $318 billion in new revenues from limiting tax deductions for upper income earners.
The House and Senate budget resolutions call for health care reform as a general proposition, but don't address the overall size or extent of healthcare reform or how to pay for it.
The Senate resolution requires that health care reform be "deficit neutral" over the next 11 years, that is, total new spending on health care over the 11-year period must be offset by spending cuts and/or tax increases over that period. This type of mechanism is known as a "reserve fund." It does not require action, but provides a budgetary placeholder that allows spending and revenue levels to be adjusted at a later time to accommodate a new deficit-neutral program. (Important note: Typically, reserve funds would require legislation to be deficit neutral over 6 years and over 11 years. The Senate's health care reserve fund only requires offsets over the 11-year period, recognizing that health care reform is likely to have a net cost up front, with savings not accumulating until later years.)
A key difference between the House and Senate budget plans is that the House plan would allow for use of the filibuster-proof "budget reconciliation" process to facilitate passage of health care reform. The Senate resolution would not use reconciliation, and health care reform would therefore be susceptible to a filibuster under the Senate approach -- with 60 votes being required to overcome a filibuster.
The key strategic question of whether reconciliation will be used to expedite health care reform will be decided during a House-Senate conference committee on the budget resolution the week of April 20. As reported by Congressional Quarterly, House Speaker Nancy Pelosi (D-CA) said, "I believe it is absolutely essential that we come out of this year with substantial health care reform legislation. That is best secured by having reconciliation in the package."
Senate Majority Leader Harry Reid signaled openness to including reconciliation in the final budget resolution, saying "we're taking nothing off the table."
However, in a letter released yesterday, the Senate's President Pro Tempore Robert C. Byrd (D-WVa) argued that the purpose of reconciliation is to "adjust revenue and spending levels in order to reduce deficits. It was not designed to create a new climate and energy regime, and certainly not to restructure the entire health care system."
However, as a point of history, the budget reconciliation process was used in 1997, 1999, 2000, 2001, 2003, and 2005 to reduce taxes (as opposed to deficit reduction). Moreover, a case can be made that health care reform--that includes spending restraints and squeezes inefficiencies out of the system--is integral to reigning in the rapid growth of health care costs which is a major driver of deficits.
In other health news, the White House this week released the Report on the White House Forum on Health Reform
Budget experts across the political spectrum agree that the U.S. is facing a long-term budget quandary of immense proportions. By 2030: Medicare, Medicaid, Social Security, and net interest are projected to consume all federal revenues. The key reasons for this bleak outlook are the (1) rapid increase in health care costs and (2) the retirement of the baby boom generation -- which together are causing Medicare and Medicaid (and to a lesser extent, Social Security) to grow at an alarming and unsustainable pace.
On the positive side, the House- and Senate-passed budget resolutions each call for health care reforms which can be integral to controlling rapidly rising health care costs. Moreover, each of the budget plans call for health care reform to be fully offset. For example, the President's Budget would pay for health care reform through Medicare and Medicaid savings and limiting tax deductions for upper income earners.
However, of considerable concern, the House- and Senate-passed budget resolutions would advance the President's proposal to permanently extend the Bush tax cuts for taxpayers earning less than $250,000 per year. The cuts are currently scheduled to expire at the end of 2010.
The cost of extending the tax cuts is more than $2 trillion over 10 years according to CBO -- revenue losses that further complicate the already precarious fiscal position of the U.S.
While one could make a reasonable case for temporarily extending the tax cuts during the economy's recovery from the current recession, it is fiscally imprudent to permanently extend the tax cuts given the rapidly rising debt burden, the desire for public investment in infrastructure, health care, renewable energy, and education, and the failure to enact any long-run reforms in Medicare and Social Security.
Update: Last week, Senate Finance Committee Chairman Max Baucus (D-MT) introduced legislation that would permanently extend most of the Bush tax cuts. Baucus press release
Education: The President's Budget would make college Pell grants an entitlement (i.e. not subject to annual discretionary spending decisions), would increase maximum awards, and would index the awards to increase with inflation. This would be partially offset by originating all new student loans in the federal government's Direct Loan program, thus eliminating bank subsidies. The House-passed budget resolution would expedite consideration of this initiative by using the filibuster-proof reconciliation mechanism, while the Senate would establish a reserve fund to adjust budget levels for the program provided it is deficit neutral over 6 years and 11 years.
In fact, the only scenarios in which a “reserve fund” has any purpose at all (other than to make a political statement) is where a mechanism is needed to allow the Budget Committees to adjust spending totals and/or committee allocations to accommodate a new program that is to be paid for by tax increases, or by spending cuts in another committee’s jurisdiction. If a new program is paid for by spending cuts within a committee’s own jurisdiction, there is no net increase in the committee’s spending or in total Federal spending, so no adjustments to the Budget Resolution are required and “reserve fund” authority is unnecessary.