Budget and Appropriations Update

Blog Post
Monday, September 20, 2010

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

FY 2011 REGULAR APPROPRIATIONS:  With less than two weeks remaining before the beginning of the new fiscal year, Congress has not passed a budget resolution or enacted a single appropriations bill for the coming year.   The House has passed a deeming resolution which could be used to pass the appropriations bills, though the Senate has not passed a similar measure.  Last week the Senate Appropriations Committee completed action on the legislative branch and defense bills.   The Senate committee has now reported eleven of the twelve regular FY 2011 appropriations bills.  However, the House Appropriations Committee has completed action on only two of the bills and no further markups have been announced.  With few legislative days remaining before Congress goes home to campaign and speculation growing that Congress may leave even earlier, it is becoming increasingly unlikely that any significant progress will be made on appropriations bills before the election.  A table showing the status of each of the twelve bills can be found here. An article in The Hill  assessed the slow pace of this year's process compared to previous years.  CONTINUING RESOLUTION: In the absence of appropriations bills, attention on Capitol Hill has turned to the continuing resolution (CR) which will be necessary to prevent a government shutdown at the end of the month.  As we covered in an earlier issue of the Washington Budget Report, a CR allows departments and agencies to continue operations, generally at existing funding levels, while Congress continues work on final appropriations bills.  As Congress turns to the CR, two issues to watch for are the length of the resolution and the potential for add-ons that increase spending for specific programs above current levels.  The expiration date of the CR may give some indication of when Congress is likely to return after the election to complete the appropriations process and any other unfinished legislative business. Controversial add-ons could make it more difficult to reach agreement on a CR. The Associated Press reported last week that the White House is pushing for over $20 billion in add-ons for priorities such as education, the postal service, and settling discrimination cases at the Department of the Agriculture and the Department of the Interior.  In a letter to House Appropriations Committee Chairman David Obey, Republicans on the committee threatened to oppose a CR that contains "any unnecessary spending or legislative provisions unrelated to maintaining government operations."  Congress should have met its obligation to pass a budget resolution and complete the appropriations bills using the regular process.  However, if a continuing resolution is necessary to prevent a government shutdown, it should be a clean measure that permits agencies to continue operating with budgets no higher than current funding levels.  Any additional spending should be considered using the traditional appropriations process. SENATE COMMITTEES CONSIDER JACK LEW OMB NOMINATION: Last Thursday, the Senate Budget and Homeland Security and Government Affairs committees held hearings to consider President Obama's nomination of Jack Lew to head the Office of Management and Budget (OMB).  Lew previously held the position during the Clinton administration.  A list of former OMB directors and their years of service can be found here.  Because OMB has responsibility for the federal budget as well as management of the government, the two committees share jurisdiction over the nomination.  Lew's opening statement at the Budget Committee can be found here.  Budget Committee Chair Kent Conrad's statement can be found here and Ranking Member Judd Gregg's statement can be found here.  Video and opening statements from the Homeland Security and Government Affairs Committee hearing can be found here.  The Washington Post, the Fiscal Times and CNN covered the hearings.  In a blog post earlier this year, we reviewed some of the challenges facing Jack Lew in his potential return to OMB.   At the hearing and in several interviews, Conrad indicated that he will push for quick consideration of the nomination by the full Senate. Conrad said "It is my hope to schedule a committee vote on this nomination soon, so that the full Senate has time to confirm the nominee before it adjourns for the election." At the hearing, Conrad also suggested that he would be open to considering budget process reform proposals such as instituting biennial budgeting.  The Homeland Security and Government Affairs Committee has scheduled a vote on the nomination for tomorrow.

BAUCUS INTRODUCES REVISED EXTENDERS PACKAGE:   Senate Finance Committee  Chairman Baucus introduced a revised version of the package of tax extenders that Congress has struggled to pass for much of this year.  The package included approximately $50 billion in tax cuts and spending.   It also included offsets such as an increase in the oil spill liability trust fund fee and provisions to scale back several tax breaks that benefit individuals and corporations. Some members of Congress have argued that oil spill liability trust fund fees should not be used to offset tax extenders because the fees are deposited into a trust fund created to respond to oil spills.  If revenues deposited into the trust fund are used to offset tax cuts while also creating an expectation for more funding to respond to oil spills, the revenues are essentially being counted twice.   A summary of the revised bill can be found here.  An effort to bring up the bill on the Senate floor failed, and the fate of the larger extenders package remains uncertain.  The debate over the extenders package was covered in Congressional Quarterly.   Earlier this year, The Concord Coalition argued that while it is commendable that the extenders bills are now being offset, the time has come for Congress to take a closer look at the list of annual extenders and ask whether each one can still be justified in light of deficits that are currently over a trillion dollars.  Also last week, congressional leaders from both parties continued to debate the fate of the Bush tax cuts.  Articles in the Washington Post and the New York Times analyzed some of the recent developments on each side of the debate. ALSO IN THE NEWS:  The Congressional Budget Office and the Department of the Treasury released reports concluding that the deficit for the first eleven months of FY 2010 was nearly $1.3 trillion.  Treasury also released updated  data detailing major foreign holdings of our nation's debt.  CBO Director Doug Elmendorf delivered a presentation on fiscal policy choices facing Congress in the current economic environment.   At a forum at the Council on Foreign Relations, former Federal Reserve Chairman Alan Greenspan argued that higher taxes will be necessary to reduce the deficit.  A Government Accountability Office report concluded that, since 2003, the United States has obligated $642 billion for military operations in Iraq. GAO also reported that an analysis of Iraqi government data showed that the country generated a budget surplus of $52.1 billion through the end of 2009.