News and updates

Yesterday, House Appropriations Chairman Harold Rogers (R-KY) released proposed spending allocations for FY12 that target non-defense spending for substantial cuts that are designed to roll back appropriations to FY06 levels (roughly). Like the FY11 spending deal reached last month, all spending bills except Defense face cuts under the proposed allocations. Split up among the Appropriations Committee’s 12 spending bills is the $1.019 trillion in total discretionary spending that was proposed by the House’s FY12 budget resolution adopted last month. Some 52 percent of that total would go to Defense for non-war funding, representing a $17 billion increase (3.3 percent) above current funding. This is the only area that is targeted for an increase in spending. Overall, the discretionary total represents a cut of $30.4 billion from FY11 spending. Compared with President’s FY12 budget request, the total allocation would provide $121 billion less in discretionary spending.

The largest cuts are slated for Labor-HHS-Education (12 percent below current funding), State-Foreign Operations bill (18 percent less), Transportation-HUD (14 percent less), and Agriculture (13 percent less). For two of those bills, those proposed reductions would come on top of major cuts enacted last month for FY11: Agriculture, which was cut by 14.5 percent, and Transportation-HUD, which was cut by 18.5 percent. And in the case of Labor-HHS-Education, the recommended spending levels are close to the FY04 appropriations levels while others are closer to FY06 levels.

The eight purely domestic non-security spending bills (i.e., all bills excluding Defense, Homeland Security, Military Construction-VA, and State-Foreign Operations) would receive a total of $336.7 billion, some $37.1 billion (10 percent) below current levels (FY11 enacted). Compared with FY10 spending under the Democrat’s control, proposed FY12 spending for those eight bills by House GOP appropriators would represent a 19 percent reduction of $77 billion.

Chairman Rogers also released a schedule of committee markups for the 12 bills, and said he expects the House to pass nine of the bills before the August recess period. However, the House will be moving these bills even though they are uncertain as to what the final spending cap for FY12 will be, as that will be determined through the ongoing debt-reduction negotiations. Floor debate on the three toughest bills with the most serious cuts — foreign aid, labor, education, health, and transportation and housing—would all be delayed until after Labor Day. Without earmarks to help garner votes for these bills, passage will be difficult given the lowered spending levels.

Meanwhile in the Senate, Budget Chairman Kent Conrad (D-ND) continues to work on his budget resolution proposal with hopes of holding a May 18 markup on the measure. Conrad appears to have moved to the left with his plan in order to strike a more definitive contrast with the House Republican budget and attract the votes of more Senate Democrats. In the Senate, where 60 votes and GOP cooperation are needed to move legislation on the floor, appropriators may not even begin this year’s appropriations process until there is a bipartisan agreement on a topline number through the budget resolution.

This all makes for a long, hot summer of partisan bickering and intense advocacy efforts.

The Senate Budget Committee may mark up an FY12 budget resolution this week, while Democratic and Republican negotiators begin the serious work of trying to reach agreement on a debt reduction plan to accompany an increase in the debt limit.

Senate Budget Resolution: The Senate Budget Committee may mark up an FY12 budget resolution later in the week. If a markup is scheduled for later this week, committee rules require that 48 hours notice be provided so a decision must be made soon for this to happen. Senate Republicans have been eager to see Democrats unveil their budget after House Republicans adopted their budget blueprint in mid-April. Despite the harsh criticism the House GOP budget has received — particularly with regard to its proposal to fundamentally restructure Medicare for individuals who retire starting in 2022 — Republicans point out that it would put the nation back on a fiscally sustainable path, cutting deficits by $4.4 trillion compared with the FY12 budget that the President submitted in February. Democrats may proposed a resolution that includes some of the recommendations of the President’s fiscal commission, which would cut deficits by $4 trillion over 10 years through a combination of spending cuts and increases in revenues via an overhaul of the tax code. In sharp contrast to the House GOP budget, it would not restructure Medicare but would include small savings from the program, in addition to preventing scheduled cuts to Medicare physician reimbursement rates for a number of years. 

The Senate Majority Leader has given no further indication of when he may try to force a vote on the House Republican budget resolution. Reid early last week reiterated his intention to do so, which would put Senate Republicans on record regarding the House GOP’s proposal to restructure Medicare. But with House Republicans seemingly backing off from their Medicare proposal as part of the White House-led debt reduction talks, forcing a Senate vote on the House budget could unnecessarily complicate efforts to reach a bipartisan agreement.  

Debt Negotiations Continue: After last week’s initial meeting in which participants agreed on the need to address the nation’s fiscal problems and outlined their positions, the White House-led deficit reduction talks will begin the difficult process of hammering out an agreement. Negotiators on Tuesday are expected to focus on areas where both sides agree that spending can be cut, possibly through cuts to mandatory spending outside of the major entitlements. The bipartisan talks are seeking agreement on a debt reduction package to move in conjunction with legislation to increase the nation’s $14.3 trillion debt ceiling. Some Republicans have suggested that they will only allow for short-term debt limit extensions until a satisfactory debt reduction package is agreed to.  

Rather than negotiate a comprehensive agreement on taxes and entitlements, the emerging expectation is that any agreement will include some substantial spending cuts along with some form of budget controls to reduce future deficits. Battles over the larger tax and entitlement issues will be tabled until a later date, possibly after the 2012 elections. Republicans last week essentially admitted that as part of the debt limit talks they won’t be able to win the major changes to Medicare that they support, but they have vowed to continue fighting for their plan over the long run. The major battles in the current talks will be over the level and scope of immediate spending cuts, and the structure and enforcement mechanism for any statutory caps on spending or debt. Republicans support spending caps that would be enforced by automatic cuts in spending, while Democrats and the White House favor a cap on the level of debt held by the public that would be enforced by both automatic spending cuts and reductions in tax expenditures along with other tax breaks.