With Congress set to recess today for four weeks it is unclear what the plan of action will be when they return in September to address funding for all discretionary federal government programs for FY ’08.  Little time will remain before the new fiscal year begins on October 1 to resolve what is shaping up to be sharp differences between the Administration and Democratic-led Congress over funding.
If, as expected, the House passes its Defense spending bill today it will have succeeded in enacting all 12 appropriations bills.  The Senate, on the other hand, has passed only the Homeland Security Appropriations bill.

The stage began to be set for confrontation between the White House and the Democratic-led Congress in February when the President proposed a total of $933 billion for annual appropriations in defense and all non-defense agencies and programs.   The non-defense portion of his budget failed to keep pace with inflation and slashed funding in many programs serving low-income people, including job training programs, rural health, mental health and substance abuse treatment, Head Start, LIHEAP home energy assistance, special education (IDEA), the Community Service Block Grant, nutrition for the elderly, Pell grants, low-income housing, and child safety and juvenile justice programs.  In May, Congress passed its budget containing $23.2 billion more than what the President proposed for non-defense spending.  This modest increase is less than one percent of the total $2.9 trillion budget.

Before the appropriations bills were even written the President began repeatedly threatening to veto any of the bills whose funding level exceeded his request.  House Republicans responded by sending a letter to the President signed by 147 of their members telling him they would sustain his vetoes without having seen the bills.  Of the 12 bills passed by the House, the White House has now written veto threat letters in response to 9 of them.  The three that escaped a veto threat were: Military Construction and Veterans even though the House bill exceeds the President’s request by $4 billion; Defense for which the House provides $3 billion less than requested; and Legislative Branch funding which the Administration did not comment on.  Two bills with less funding than the President requested, Financial Services and State/Foreign Operations, received veto threats because of policies they contain.  The Administration has threatened to veto the remaining 7 because they exceed his spending request.  The largest of the bills containing many programs that serve low-income families is the Labor-HHS-Education bill which is funded at $9 billion above the President’s request in the Senate committee-passed bill and $10.9 billion higher in the House bill.

It is not clear how many appropriations bills the Senate will attempt to send individually to the floor prior to October 1.  As September 30 approaches there will almost certainly be bills that have not gone through the full process of negotiation between House and Senate leading to legislation sent on to the President for his signature. Typically Congress needs to pass continuing resolutions (CRs) to avoid government shutdowns for the agencies whose funding for the new year has not been determined.  Last year the Republican-led Congress failed to pass multiple spending bills leaving the newly-elected Democratic leadership to finish the work.  Funding for FY ’07 was finalized in an omnibus spending bill in February.

The Office of Management and Budget (OMB) Director will be the Administration’s key representative negotiating the outcome of the appropriations process with Congress.  In an unexpected move this summer, OMB Director Rob Portman announced his resignation and the President quickly nominated as his replacement former House Budget Chairman Jim Nussle who lost his bid to be governor of Iowa in ’06.  Many Democrats are uneasy about Nussle’s partisan and confrontational style and his history of proposing budgets that cut low-income programs even more deeply than the Bush Administration proposed.   The two Senate committees with jurisdiction over the nomination both overwhelmingly cleared the nomination for consideration by the full Senate.  However, Senator Sanders (I-VT) placed a ‘hold’ on the nomination, a procedure that blocks a vote by the full Senate.  He highlighted the Administration’s lack of concern for working class and poor people as his reason.  At least one other Senator also has a ‘hold’ on the nomination.  One likely scenario is that the President will use his prerogative to appoint Nussle as OMB Director without confirmation while Congress is in recess this month.

Congressional leaders met this week with the President to see if they could find common ground.  While there may be some flexibility to shift funds within the bills, the President is reportedly holding fast to his overall spending level.  In September the President is expected to make a request to Congress for supplemental funding for the unpopular war in Iraq and Afghanistan and additional foreign aid for allies in the Middle East.  This request further sets the stage for confrontation on competing spending priorities.

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