News and updates

Shutdown Countdown…

Late last night, House Republicans announced that they’re prepared to pass a new one-week continuing resolution (CR) extension with an additional $12 billion in cuts to FY11 unless Democrats “get serious about making real spending cuts on a long-term bill” for the remainder of the year.  The two parties have been negotiating over proposed cuts for the year, with Republicans favoring the $61.5 billion in cuts included in HR 1 as passed by the House and Democrats grudgingly agreeing on a $33 billion level of cuts. 

The surprise move by Republicans to approve yet another CR is the latest threat to either force action on the FY11 budget or prepare for a government shutdown at the end of this week.  Current stopgap funding expires Friday night, and with only a few days remaining it would be very difficult for legislation incorporating any final agreement to be drafted and enacted by that time.  The Washington Post reported yesterday that OMB has instructed federal agencies to begin preparing for a possible shutdown.  House leaders are also preparing for a government shutdown as they plan to distribute a pamphlet about the mechanics of a partial congressional work-stoppage to all lawmakers’ offices later this morning.

A draft bill being prepared by the House Appropriations Committee last night would fund the Defense Department through the end of FY11 but require $12 billion in new cuts as the price for keeping domestic agencies and the State Department operating another week.  The $12 billion is intended as a further down payment toward a final deal, just as $10 billion in cuts were promised under two prior CRs.  But Boehner has also raised the ante by demanding total cuts of more than the $33 billion target that was the focus of talks over the weekend.

Senate Democrats will likely oppose the proposed one-week CR extension but if they blocked the measure they could be held responsible for shutting down the government.  House Appropriations released a summary of the new one-week stopgap measure, which is designed to appeal to GOP conservatives by providing deeper cuts than prior CR extensions (cutting $12 billion in discretionary spending for the one week, versus $2 billion a week under the last two extensions).  

The House Speaker, Senate Majority Leader, and the two House and Senate Appropriations chairmen will meet today at the White House with President Obama and Vice President Biden to try to move negotiations forward – even in light of the House Republican’s new offensive on the FY11 process.

FY12

As if the FY11 process isn’t exciting enough, the House Budget Committee Chair will roll out an FY12 blueprint today that could slash up to $6 trillion in the next 10 years from federal spending, reforms and cuts entitlements, and overhauls sections of the tax code.  The Republican budget is expected to include several major proposals: reduction of the corporate tax rate to 25 percent; elimination of corporate tax loopholes; spending cuts with enforceable caps; reforms to “save critical health and retirement programs”; health reform that “repeals and defunds last year’s health reform law,; and a promise to restore “America’s exceptional promise,” according to a draft summary of the budget.

Sources said Ryan plans to lower spending below FY08 levels, a significant cutback but not as dramatic as the previous discussion to cut down to FY06 levels.  Other plans include block grants for Medicaid, shifting control to the states. Those on Medicare would get to choose among competing private insurance plans.  Additionally, the budget proposal is expected to eliminate funding for the health care law, likely by stopping the expansion of Medicaid and subsidies for private health insurance.

The bill will likely get marked up in committee Wednesday, and the Rules Committee plans to outline the parameters for debate on Tuesday or Wednesday of next week. At that point, the House is expected to pass the resolution and send it to the Senate.

Balanced Budget Amendment

In related news, House Republicans are looking to attract support from enough lawmakers in both parties to move a balanced-budget amendment to the US Constitution in conjunction with coming debates over the budget and the debt limit.  The House GOP proposal would require the President to submit a balanced budget, require Congress to enact balanced budgets each year but allow an annual deficit to occur if Congress specifically approves by a three-fifths majority vote of each chamber, and require three-fifths majority votes in order to raise the nation’s statutory debt limit.  The measure would allow a waiver of restrictions if the nation is at war or involved in a major military conflict.  A constitutional amendment requires two-thirds votes of both chambers, and then must be ratified by at least 38 states.

All 47 Senate Republicans last week joined together to back their own proposed balanced-budget constitutional amendment that also would cap federal spending at 18 percent of gross domestic product.  Government spending now stands at about 24 percent of GDP, and has historically run at about 20 percent of GDP.  Similar to the House proposal, it would direct the president to submit, and Congress to enact, a balanced budget annually; allow a deficit to occur only by supermajority votes of the House and Senate (a two-thirds vote, versus a three-fifths vote in the House measure); waive the restriction in times of declared war (although a three-fifths vote would be needed to run a deficit when there is a military conflict without a declaration of war); and require three-fifths votes of both chambers to raise the debt limit.  The Senate Republican proposal would also require two-thirds votes of both chambers to raise taxes.

The FY11 budget predicament reaches its climax this week as tea party conservatives and Democratic leaders clash over how much, or how little, to slash from this year’s budget, and whether to include conservative policy riders that limit the federal government’s ability to spend money on things like Planned Parenthood, environmental regulations, and other liberal priorities.  If the two sides don’t come to agreement, the government will shut down on Saturday.

Everyone agrees that the outcome of the FY11 budget that comes to a head this week will affect the budget battles ahead, so both sides are strategizing what to fight for in the current budget and how much to hold off the bigger battles for the FY12 budget debate.

Negotiations began last week on a possible FY11 package that would cut $33 billion for the year ($73 billion from President Obama’s request for fiscal 2011), although House leadership has repeatedly said no agreement had been made on a specific level of cuts.  Supported by tea party activists, GOP freshmen, and other conservatives have argued for the full $61.5 billion in cuts that was included in HR 1 as passed by the House in February, $10 billion of which has already been enacted as part of GOP short-term stopgap funding extensions.  

When the overall budget number and cuts are agreed to, it’ll be a race against the clock to keep the government running. Earlier this year, Republicans instituted a three-day vetting period for most pieces of legislation and they are unlikely to waive that requirement for the FY11 bill.  This essentially makes Wednesday the final day a compromise could hit the floor and gain approval before the end of the current continuing resolution (CR) on Friday at midnight.  They can also choose to pass a short-term CR to fund the government for a few days but increasing numbers of both Democrats and Republicans believe it is time to either reach a final agreement or have the showdown over spending that many have expected could eventually occur.  Two continuing resolution (CR) extensions have been enacted in the past month, with the latest extension of government spending authority expiring Friday night.

And, sadly, this is not the last budget battle Democrats and Republicans will fight this year.  The FY12 budget battle will begin Tuesday when House Budget Chairman Paul Ryan (R-WI) unveils his proposal that promises to cut more than $4 trillion from federal spending over the next decade.  The annual budget resolution is a non-binding blueprint that simply outlines Congress’ goals for spending, taxes and deficits in future years.  It is usually more important as a one-year document that sets a limit on discretionary appropriations for the coming fiscal year, and for providing procedural protections against Senate filibuster for bills moving through a special “reconciliation” process.  House floor consideration of the GOP budget is expected next week.

This action will almost certainly set off a broader public debate concerning the need to reduce future debts and deficit.  Lawmakers and others who have been told about the budget resolution say it will aim to scale back some domestic programs to FY06 spending levels, include some cuts to Defense spending and call for cost savings in mandatory spending programs including Medicaid and Medicare.  The budget resolution is expected to reflect plans to replace the current formula-based Medicaid program, which provides health care to the poor, with a block grant system in which the states receive a set amount of funding from Washington and have greater latitude to design their own programs and determine who is eligible for Medicaid.

The budget resolution will kick off the next round of rhetorical battles over the more than $1 trillion deficit and growing $14 trillion national debt.

The Office of Federal Relations is continuing to monitor developments on both FY11 and FY12 budgets and will report new information as it becomes available.

Negotiations on the FY11 budget continued yesterday mostly through competing press conferences where Republicans and Democrats traded blame, with little indication of any movement toward a compromise.  The likelihood of government shutdown remains high as Democrats continued to argue that GOP leaders were refusing to compromise because they didn’t want to upset conservatives and tea party groups, while Republicans argued that Democrats didn’t yet have a unified position from which to negotiate. It has now been 39 days since the House passed its FY11 bill, HR 1, which would cut $61.5 billion in discretionary spending for the remaining six months of the fiscal year. 

The current continuing resolution (CR) doesn’t expire until April 8, next Friday night, but it will take some time to draft a legislative package once the outline of a deal is reached. And until a top-line spending figure is agreed to, negotiators can’t determine the extent of cuts and hence the specific funding levels for individual agencies and programs.  The practical deadline to reach a deal may be the end of this week, which would then provide the weekend for drafting the measure so House Republicans could post it on their web site as soon as possible early next week to comply with House rules requiring that legislation be publicly available for 72 hours before votes occur.  It’s because of this that the media is reporting that there is a real potential for a government shutdown.

The Office of Federal Relations continues to urge our Congressional Delegation to oppose reductions to federal research and training accounts that would take them below FY10 levels.