CHN: Senate Committee Passes Budget with Tight Restraints on Spending

Congress took its first step in the budget process when the Senate Budget Committee passed its FY 2011 budget  with a vote of 12-10 on April 22, with Senator Feingold (D-WI) joining all Republicans in opposing the bill.  Unlike the President’s budget, which was released in February, Senate and House budgets do not provide program-by-program funding levels for discretionary (annually appropriated) programs.  Instead, they provide an aggregate funding level.  The Senate Committee budget would provide $1.124 trillion to fund discretionary programs, $4 billion less than the $1.128 trillion provided in the President’s budget.  The Senate assumes that the savings will come from international and State Department funding.  Under both the President’s and Senate’s budgets, funding for military, homeland security, international and veterans (‘security’ programs) would be allowed to grow above inflation for the next three years.  “Non-security” discretionary programs – these include many human needs programs in areas like housing, job training and employment, community services and pre-K through secondary education – would be frozen for three years, with no adjustment for inflation.  The freeze is not applied across-the-board, so some programs can receive more funding while others decrease.  For a more detailed description of funding in the President’s budget see the Human Needs Report for March 1.
The President had left room for some expansion in annual appropriations by shifting some funding from the discretionary to mandatory budget categories.  (Mandatory programs do not need annual appropriations; for definitions of these terms, see the CHN glossary.)  The President moved $2 billion for the Low Income Home Energy Assistance Program (LIHEAP) and all funding for Pell Grants to the mandatory category.  The Senate Committee does not make this shift.  After adjusting for the change, the Senate budget assumes $5.5 billion more in Pell Grant costs plus the $2 billion for LIHEAP will have to be covered within the same total figure proposed in the President’s budget. This will require cuts beyond those in the President’s budget to discretionary non-security programs.  (See chart comparing programs in the President’s budget with FY 2009 and FY 2010 funding levels.)

The Bush tax cuts of 2001 and 2003, two wars that have not been paid for, and a deep recession have caused deficits to rise.  The deficit is projected to hover around $1.3 trillion in 2011.  The recent signs of recovery on Wall Street have not yet been felt by ordinary workers and families as joblessness and poverty persist.  Many mainstream economists believe that the government should continue to make investments in programs now to more quickly bring about a recovery that will be felt on Main Street instead of cutting spending to address deficits.  Advocates who agree with those economists are concerned about the shift in Congress from an emphasis on job creation and economic recovery to a focus on reducing the deficit as evidenced by the freeze in discretionary spending.

On the revenue side, the Senate budget like the President’s budget provides for the extension of the 2001 and 2003 tax cuts for those earning up to $200,000/$250,000 (individual/married couples filing jointly) while allowing the two top income tax rates of 33 and 35 percent to revert to their pre-2001 levels of 36 and 39.6 percent.  Both budgets also make permanent the improvements made in the Earned Income Tax Credit and the Child Tax Credit that were enacted in the economic recovery legislation. The Senate budget makes room for only a two-year extension of exemptions from the alternative minimum tax (AMT) and extends the estate tax at the FY 2009 level (which exempts estates worth less than $3.5/$7 million and sets a maximum 45 percent tax rate).  The President’s budget extends the AMT and estate tax levels for 5 years.  The difference between the two- and five-year extensions is the predominant reason the Senate budget shows the deficit will be reduced to $545 billion by 2015 versus the President’s budget, which reduces the deficit to $793 billion by 2015.

The Senate bill also contains a reconciliation instruction that would allow the Finance Committee to identify revenues or savings that could be used to pay for jobs legislation.  Under reconciliation only 51 votes would be needed to pass a bill instead of the 60 votes frequently needed for other legislation.  Reconciliation rules require that legislation passed in this way must result in a net reduction in the deficit, in this case by $2 billion over 5 years.

During Committee consideration, several key amendments passed.  An amendment by Senator Graham (R-SC) to withdraw the authority to use $44 billion in Trouble Asset Relief Program (TARP) funds passed with bi-partisan support, 14-9.   By a 15-8 vote the Committee adopted an amendment by Senator Feingold (D-WI) that would require additional war spending to be offset (that is, paid for) over the next 10-year period.  The Committee agreed by voice vote to an amendment by Senator Begich (D-AK) to freeze salaries for members of Congress from FY 2011 to FY 2015 and to redirect the funds towards deficit reduction.  Senator Sessions (R-AL) offered an amendment imposing very tight multi-year discretionary caps, which failed 10-13 along party lines.

When the Budget Committee concluded its two-day markup Senate Majority Leader Reid predicted that the bill would come to the floor for a vote before Memorial Day recess.  The House still has not decided whether they will even attempt to mark up a bill in committee and take it to the floor.  A number of the more conservative members of the Democratic Blue Dog caucus in the House are concerned about their elections in the fall and do not want to vote for a budget with such large deficits.  Usually by this time the House and Senate would have passed their bills or determined that they would not pass a budget – as happened in the Senate in 2004 and 2006.  This year, however, health care dominated the agenda through the end of March and work on the budget is well behind schedule.  The Congressional budget serves several main purposes; it sets an overall funding level for discretionary programs, it sets a revenue target for the fiscal year and it may contain reconciliation instructions.  Absent a joint House/Senate-passed budget resolution, Congress can use a ‘deeming resolution’ to set the aggregate discretionary funding level for the Appropriations Committees to divide up among the 12 Subcommittees for funding the programs under their jurisdiction.  The deeming resolution is often included in an emergency supplemental appropriations bill or the first appropriations bill passed by each chamber.  But the Senate will not be able to pass legislation under the reconciliation procedure if no budget resolution is passed, taking away the possibility of enacting bills with only a simple majority.   Supermajorities in the supercharged partisan atmosphere of an election year may be hard to come by.

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