Category: Budget

President Obama will delay the release of his FY13 budget request by a week, until February 13^th, but lawmakers will still get a start on budget season today when the Congressional Budget Office (CBO) releases its annual budget and economic outlook. This report will certainly re-energize the debate around the issue of the automatic spending cuts that are set to take effect next January as required in the Budget Control Act of 2011 (PL 112-25).  Those cuts, officially referred to as a sequester, were required when the Joint Select Committee on Deficit Reduction failed to produce $1.2 trillion in savings over a decade.  The cuts are expected to reduce appropriations for FY13 by roughly 9 percent across the board.

The CBO’s report, to be released momentarily, serves as the unofficial kickoff of budget season.  Congressional budget committees in both chambers will hold hearings over the next few weeks on spending, taxes, and entitlements. The pace will pick up further when President Obama presents his FY13 budget request to Capitol Hill on February 13^th. Committee leaders say they plan to hold hearings on the request and want to write congressional budget resolutions this spring. Those resolutions will serve as non-binding blueprints for appropriators as they draft the annual spending bills.

The President is expected to include an alternative to the automatic cuts in his budget request, which will likely include a number of familiar policies that have been recommended previously but not enacted.  House Republicans will present their recommendations in their FY13 budget resolution in a few months. The GOP budget is expected to limit the automatic cuts, especially for defense programs, by making further reductions in discretionary and maybe even mandatory programs.

However, none of this is likely to lead to any serious deficit reduction action.  As you might recall, lawmakers debated and negotiated this issue for much of 2011 and still failed to come to any consensus on deficit reduction recommendations.  This will probably end up in a chaotic post-election lame-duck session to deal with the sequester – and a whole lot of expiring tax cuts – which will kick in on January 2, 2013 unless Congress takes action. 

Read more about the traditional calendar of congressional budget activities.

President Obama will release his FY13 budget on February 13^th this year, one week late. Under the law, the budget is to be released on the first Monday in February but yesterday the Office of Management and Budget (OMB) announced that they would be releasing the budget late. The Obama administration also delayed the release of the budget last year, waiting until February 14^th. OMB offered no reason for the delay, but it’s not unusual for the administration to push back the date, this being the third time it has done so. President Obama is expected to offer some broad outlines of his budget this evening in the State of the Union address. The Congressional Budget Office meanwhile, will provide detailed spending and economic projections for the next 10 years on January 31^st, when it releases its annual budget and economic outlook for fiscal years 2013-22.

The President’s budget request will urge lawmakers to come up with $1.2 trillion in spending cuts and scrap the automatic reductions known as sequesters that are due to kick in next year. Despite the failure of last year’s joint deficit committee, Obama has urged lawmakers to continue seeking ways to cut the deficit rather than face the automatic budget cuts mandated by last year’s agreement to raise the debt ceiling. During his State of the Union address, the President is likely to offer the broad outlines of his deficit-reduction plan. If lawmakers were to reach an agreement on deficit reduction, they would have to amend the Budget Control Act to turn off the sequester. Unless the law is changed, OMB will implement the sequester in January 2013 that would cut discretionary spending by a projected $97 billion in that year (7.8% cut to the overall FY13 budget). The law calls for annual sequestrations totaling almost $1 trillion and saving $1.2 trillion, including reduced interest costs, through fiscal 2021.

Members of congress from both parties say they are hoping to reach a deal with the President to negate the automatic cuts, or substitute another deficit-reduction package for them, before they take effect in January 2013. But because of the elections this fall, it seems most likely that the sequestration will be dealt with after November, leaving plenty of uncertainty in the months ahead.

Avoiding yet another threat of government shutdown, the Senate on Saturday approved the FY12 conference report after the House adopting it Friday.   The final package completes the work on the FY12 appropriations bills.  It includes the text of the underlying Military Construction-VA bill and eight other spending measures: Defense, Energy-Water, Financial Services, Homeland Security, Interior-Environment, Labor-HHS-Education, Legislative Branch, and State-Foreign Operations.  The President is expected to sign this bill sometime this week.  In November, a smaller package containing the other three annual spending bills was enacted (Agriculture, Commerce-Justice-Science, and Financial Services).  See our December 15^th posting for information how programs will be funded for the year.

As an aside, it had been reported that the final FY12 deal included an across-the-board cut of 1.8 percent to provide for disaster funding.  That legislation, however, was not approved so there will not be an across-the-board cut for FY12. 

The Office of Federal Relations is signing off for the year.  We will resume posting to this blog after the New Year.  Happy Holidays!