Budget and Appropriations Update

Blog Post
Monday, July 19, 2010

Below are several developments we have been following since the last edition of the Washington Budget Report (sign up here) was published. 

2011 APPROPRIATIONS PROCESS MOVES FORWARD AS TIME STANDS STILL FOR THE 2010 SUPPLEMENTAL: Last week the House Appropriations Committee continued to make progress on the FY 2011 bills. House subcommittees reported the Military Construction and Veterans Affairs; Energy and Water; and the Labor, HHS, and Education bills. This week the full committee is scheduled to consider the Transportation/ HUD and Military Construction/ Veteran Affairs bills as well as formal subcommittee allocations. On the other side of the Capitol, the Senate Appropriations Committee held its first markups of the FY 2011 process. The subcommittees and the full committee completed action on the Homeland Security; Military Construction and Veterans Affairs; and Agriculture bills. The full committee also approved a spending plan that divides $1.114 trillion between the twelve subcommittees. The $1.114 trillion allocation for overall non-emergency discretionary spending is below the levels in the House deeming resolution ($1.121 trillion), the Senate Budget Committee's budget resolution ($1.124 trillion), and the President's budget ($1.128 trillion). While the Senate has not passed a budget resolution or a deeming resolution to make the allocations enforceable with budget points of order, Senate Budget Committee Chairman Kent Conrad indicated that he is considering a measure similar to the House deeming resolution. In a vote that could signal trouble ahead for the FY 2011 bills and a deeming resolution, committee Republicans voted against all three bills and the spending plan. In a statement at the markup and in a letter to Chairman Inouye, Ranking Member Thad Cochran and other Republicans threatened to oppose any of the FY 2011 bills that do not adhere to a freeze on non-defense discretionary spending proposed in a McCaskill-Sessions amendment that failed in a close vote earlier this year. According to Cochran, the Republicans will support an overall discretionary cap of $1.108 trillion. The Associated Press and Politico covered the markup. Meanwhile, a dispute over approximately $23 billion in domestic funding and offsets added by the House continued to delay further Senate action on the FY 2010 war supplemental. The Obama administration and several senators oppose offsets included in the House bill, such as an $800 million rescission from several education grant programs. The Fiscal Times and  Politico detailed the dispute over education funding. Also last week, the President requested $139 million in supplemental funding to reduce patent application backlogs and aid in administering broadband grants. The request was offset using unobligated balances appropriated to the Census Bureau.

FY 2010 DEFICIT PASSES $1 TRILLION: In its Monthly Treasury Statement, the Department of the Treasury reported that the FY 2010 deficit to date is over $1 trillion -- only $82 billion less than the deficit that was reported at this time last year. The Congressional Budget Office released a similar estimate earlier this month. The administration's current estimate of the deficit for the full fiscal year is approximately $1.6 trillion. The Office of Management and Budget will formally update its deficit projections in the Mid-Session Review expected later this week. CBO will also release updated deficit projections later this summer. 

TO EXTEND. . . OR NOT TO EXTEND? SENATE COMMITTEE AND GREENSPAN PONDER FUTURE OF BUSH TAX CUTS: The Senate Finance Committee held a hearing last week to consider the future of the 2001 and 2003 tax cuts scheduled to expire at the end of this year. In January, CBO and the Joint Committee on Taxation estimated that extending the 2001 and 2003 cuts would increase budget deficits by about $2.6 trillion from 2011 through 2020 (excluding the effects of debt service). In preparation for the hearing, the Joint Committee released an analysis of the tax provisions currently in effect and the proposals in the President's budget. Testimony and opening statements from the hearing can be found here. At a recent hearing of the President's fiscal commission, The Concord Coalition's Executive Director Robert Bixby testified that "the tax cuts scheduled to expire should not be permanently extended absent a plan for long-term fiscal sustainability." In an interview on Bloomberg Television, former Federal Reserve Chairman Alan Greenspan cited concerns about the deficit and argued that Congress should allow the tax cuts to expire at the end of the year. At a 2001 Senate Budget Committee hearing, Greenspan testified in support of the tax cuts. New York Times stories covering the reaction to his testimony then are available here and here. At the hearing and in other public appearances that year, Greenspan raised concerns about paying down the debt too rapidly. At the time of Greenspan's testimony, the debt was approximately $5.7 trillion. Today it is over $13 trillion

ARE TWO COMMISSIONS TWICE AS GOOD? Last week, the House Natural Resources Committee unanimously approved an amendment creating a second commission to investigate the oil spill in the Gulf of Mexico. President Obama created the first commission in May using an executive order. According to materials released by the committee's Republicans and an article in The Hill, the House language is identical to an amendment that the Senate Energy and Natural Resources Committee approved as a part of The Outer Continental Shelf Reform Act of 2010 that the committee reported earlier this year. The Senate language would authorize appropriations of $10 million during the first year and $3 million in each subsequent fiscal year in which the commission convenes. The President submitted a budget amendment requesting $15 million to fund the first commission. If Congress were to fully fund the President's request for the first commission and the authorized level for the second commission, total funding for the two commissions would be at least $25 million, with the second commission potentially receiving additional funds in subsequent years. In contrast, the President's fiscal commission is responsible for completing a review of the entire federal budget by December 1 and is working with an initial budget of $500,000. Media reports have suggested that it has had to borrow staff from federal agencies and nonprofits. According to a database maintained by the General Services Administration, there are currently over 1000 federal advisory committees with a combined annual budget of over $364 million. 

ADMINISTRATION ESTIMATES STIMULUS CREATED UP TO 3.6 MILLION JOBS: The Council of Economic Advisers released a report last week estimating that the 2009 Recovery Act created or saved between 2.5 million and 3.6 million jobs. At a Joint Economic Committee hearing, Dr. Christina Romer testified on the report and the general economic outlook. It did not come as a complete shock when the report was greeted with enthusiasm by Democratic leaders and skepticism from many Republicans.  Also last week, the House Budget Committee held a hearing on Recovery Act progress that included testimony by officials from the Department of Agriculture and the Department of Energy. Earlier this year, CBO also released a report estimating the effect of the Recovery Act on employment and economic output. 

ALSO IN THE NEWS: The Congressional Budget Office released a study of the biofuels tax credit and a review of its economic forecasting recordWashington Post columnist David Broder and a Dallas Morning News editorial praised the work of the President's fiscal commission. The Energy Information Administration released an analysis of the impact of the Kerry/ Lieberman climate change bill on energy markets and the economy. At a forum sponsored by the Aspen Institute, Office of Management and Budget Director Peter Orszag discussed his departure. The Washington Post covered a budget surplus in Virginia and the challenges posed by an international "wall of debt." An article in the Washington Independent made the point that there will be no reconciliation process without a real budget resolution.  And last. . .but certainly not least, an article in a British paper recounted an interesting budget vote.