Uncertainty continues for anyone involved with the federal budget. Just a few weeks ago, the hope was the Congressional Super Committee would set forth a clear path for deficit reduction. The framework would guide Congress to get the federal government back into a normal cycle of passing annual budgets by the beginning of the fiscal year on October 1.
Now that the Super Committee has failed, the question is “So now what?” on the federal budget?
The most immediate spending issue is the federal budget for the current fiscal year 2012.
Most of the government is operating under a continuing resolution (CR) that expires on December 16. (Congress passed three smaller annual appropriations in late November). If Congress cannot reach agreement on a budget or new CR by December 16, then a government shutdown would happen (See “Inside the World of Continuing Resolutions“).
Every year is getting more and more atypical in federal budget politics.”
The committees on appropriations in both the House and Senate are working in high gear right now in a joint conference to combine the various appropriations for federal spending into a $900 billion consolidated Omnibus bill. The prospects for a compromise on the FY 2012 budget seem on the face of it to be reasonably good compared to the differences on the Super Committee or the debt ceiling debates.
The Budget Control Act (BCA) of 2011, which resolved the debt ceiling impasse in August, also included discretionary budget caps that shape the FY 2012 budget currently under consideration. The cap for FY 2012 requires nearly a $45 billion reduction from the pre-BCA estimate of non-war discretionary budget authority. So at least both the Senate and House are working toward the same BCA cap of $1.043 trillion.
Yet, nothing is easy in politics these days.
First, the cap from the BCA did not specify where the reductions should be taken except that reductions in defense spending were less than non-defense spending. War spending is completely exempt from reductions. The House and Senate and the two political parties have different views on where to take reductions. The Republican-led House has made reductions in a few areas that matter most to the Democratic-controlled Senate, such as public assistance programs. Coming days will reveal the extent to which the various factions are willing to risk breaking a deal over the specific reductions.
Second, the House has included “policy riders” attached to the appropriations bills. These riders address non-budgetary issues like healthcare and financial services reform. The policy riders complicate negotiations with the Senate by bundling controversial policy issues with relatively straightforward funding levels. In short, among the biggest sticking points in getting the budget negotiations concluded has nothing to do with the budget at all.
Finally, the extension of the payroll tax has become intertwined with the FY 2012 budget. With negotiations proceeding well on the Omnibus, it is now being held hostage by the fierce battle over the tax extension.
Next up in federal budgeting is the FY 2013 budget. This could be more contentious than anything seen so far, given the instructions coming from the Office of Management and Budget to plan for a 5 percent reduction in discretionary spending in fiscal year 2013, and prepare for more cuts –at least 10 percent.
The White House is finishing the budget to be submitted to Congress in February. It will also be consistent with BCA spending caps. Sequestration resulting from the Super Committee failure, involving reductions on the order of a trillion dollars total of defense and non-defense discretionary spending, is scheduled to take place in January 2013. This will be right as the new 113th Congress comes in session and the inauguration of the President.
Every year is getting more and more atypical in federal budget politics. Typically, very little gets done in Congress or by the White House during election years. The FY 2013 budget, based on this experience, would not be resolved until after the elections in November.
The coming election cycle might be different. Doing nothing on spending for the next 11 months might not be enough to win reelection with the electorate agitated over spending.
James Windle The writer is a federal employee who has worked for executive branch agencies, the Executive Office of the President, and Congress. The views and opinions of the writer are his solely and independent from the United States Government.