CHN: Federal Budget Next Steps: House Budget Resolution Expected This Week

Two questions emerged as disputes were reported last week among House Republicans over their budget resolution:  (1) would differences over appropriations levels scuttle the budget? and (2) how much difference will it make anyway?
Most budget-watchers believe the answer to the first question is “no” – House Budget Committee Chairman Paul Ryan (R-WI) is expected to unveil his proposal at a speech before the American Enterprise Institute on Tuesday, with Committee action expected the next day.  As for the second question, while the full House would be expected to pass the budget in a party-line vote, Senate Majority Leader Reid (D-NV) has already announced the Senate will not vote on a budget resolution.  So there is no chance that the Ryan budget will be adopted by Congress.

Still, elements of Chairman Ryan’s proposal may prove influential.  In order to accommodate the House’s restive right wing, it is likely that the House budget will call for FY 2013 appropriations levels set lower than the caps already agreed to by Congress in the Budget Control Act.  That deficit reduction law limited FY 2013 appropriations to $1.047 trillion.  Some of the more right-wing members want the total reduced to $1.028 trillion.  Others, in the more extreme Republican Study Committee, have proposed slashing FY 2013 spending to $931 billion, or $116 billion less than the level Congress previously approved.   Republicans on the House Appropriations Committee, however, would prefer to stick with the cap already enacted.  Washington’s best guessers are expecting the Ryan budget to wind up at the $1.028 trillion level.

Senate Budget Committee Chair Kent Conrad (D-ND) plans to adhere to the $1.047 trillion spending limit.  If the House goes $19 billion or more below the enacted levels, the House and Senate will eventually have to negotiate the difference in the appropriations bills that must pass by September 30 (or be temporarily extended at that time).

The House Budget Resolution will do more than set appropriations totals.  It will also make other sweeping recommendations for cuts in mandatory programs such as Medicaid and SNAP (food stamps).  Last year, the Ryan budget proposed turning these two basic entitlements into block grants with fixed funding levels.  The Medicaid cut alone would be $1.4 trillion over 10 years.  The commonplace wisdom is that this year’s budget will repeat these proposals.

Last year’s House budget also made substantial reductions and structural changes in Medicare.  The new budget is expected to propose major changes to Medicare once again, but the proposal may be different.  Chairman Ryan has recently teamed up with Senator Ron Wyden (D-OR) to recommend a new system of “premium supports” that would subsidize insurance costs, allowing Medicare beneficiaries to opt for the current fee for service approach or other private insurance coverage.  Last year’s version did not allow beneficiaries to continue in the current program.  However, analysts are skeptical about whether the subsidies provided will really be enough to allow retirees to afford the current program, thereby forcing them into more limited insurance packages while also increasing their costs.  Last year’s plan would have doubled the individual’s costs (from $6,150 in 2022 under current law to $12,500 under the proposed plan).  The shifting of costs from the federal government to individuals in Medicare will be something to watch for in the new version of Medicare in this year’s House budget plan.  Last year’s plan featured such a shift, with modest federal savings (federal costs would be $8,000 for a 65-year old entering Medicare in 2022 under the new plan versus $8,600 under current law) but dramatically higher total costs ($20,500 in the new proposal as compared to $14,750 under current law) because of the reliance on more expensive private insurance.

With automatic across-the-board cuts in annually appropriated programs scheduled to begin in January 2013 unless Congress acts to reduce the deficit by other means, the expected massive cuts in the Ryan budget (last year totaling $4.3 trillion over ten years) would serve as one blueprint for avoiding the across-the-board cuts.  Two elements likely to be missing from any Ryan plan are a revenue increase and increased military savings.  While the President’s budget also seeks to replace the automatic January 2013 cuts with other forms of deficit reduction, his plan includes $1.5 trillion in revenue increases and nearly $500 billion in defense cuts over the next ten years.  Such a balanced package makes it possible to minimize the cuts to human needs programs.  The Ryan budget, if it lacks such balance, will inflict deep cuts in needed services.

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