CHN: Why No Budget Resolution This Year is Not Such a Bad Idea

Six weeks after the House passed its budget resolution for fiscal year 2005 (and eight weeks after the Senate passed its version), House and Senate negotiators have been unable to resolve differences between the two plans (H Con Res 393 and S Con Res 95). As reported in the April 23 Human Needs Report, a handful of Republican Senators are bucking their party leadership and siding with Senate Democrats to insist the budget deal include a pay-as-you-go rule, requiring Congress to pay for new tax cuts and new spending by either cutting elsewhere in the budget or by raising revenues.
Talks are continuing and Republican leadership has not given up on finding a compromise. It’s not clear if any deal will tempt the hold-out Republicans to abandon their stance. But what happens if there is no compromise and no final budget resolution? Without a budget for this year, the Senate will continue to operate under the rules of last year’s budget.

Despite the possibility that last year’s rules may mean a slightly lower overall discretionary level, there are a number of reasons why low-income families may be better off without a final budget resolution. Here’s why:

1. Possible Cuts to Medicaid. In March, the Senate voted 53 to 43 to strip out cuts to entitlement spending proposed in the Senate budget resolution that would have slashed more than $11 billion from Medicaid. But the House budget resolution includes a cut of $2.2 billion that would likely come from Medicaid and also requires billions in cuts from other unspecified entitlements. So while the Senate resolution does not cut Medicaid, the House resolution cuts it by $2.2 billion. At the moment, budget negotiators are saying some Medicaid cuts are likely in the final deal.

2. No Budget, No Reconciliation. Both the House and Senate budget resolutions allow Congress to pass huge new tax cuts through a process called reconciliation. Reconciliation bills are designed to force Congress to meet revenue and outlay targets and have a special set of rules that particularly affect the Senate. A reconciliation bill that includes tax cuts would need just 51 votes in the Senate, because debate is limited and it cannot be filibustered (it takes 60 votes to end a filibuster). In such a closely divided Senate (currently 51 Republicans, 49 Democrats and an Independent), reaching 51 votes is a much lower hurdle than 60 votes. The massive tax cuts passed in 2001 and 2003 were passed as reconciliation bills. The House resolution calls for $138 billion in new tax cuts over the next five years that would be covered by reconciliation. The Senate resolution puts $81 billion under a reconciliation process.

3. Discretionary Funding Might Not be Lower Without a Resolution. One possible downside to not having a budget resolution is the overall funding level for discretionary programs (those appropriated annually) will continue at the level set in last year’s budget resolution. That amount – $814 billion – is lower than the amount proposed in either the House ($819 billion) or Senate budget resolution ($821 billion). So without a budget resolution the overall discretionary level could be $5 to $7 billion below what it would be if negotiators were able to reach agreement. Discretionary programs make up about 40 percent of all federal spending and include things like defense, public education, housing, highways, biomedical research, national parks, job training, certain nutrition, child care and child welfare programs. However, observers of Congress believe it is possible for appropriators to break the $814 cap and simply pass bigger appropriations bills even without a budget resolution.

4. A New Resolution is Likely to be More Fiscally Irresponsible. Analysis by the Center on Budget and Policy Priorities finds that fiscal discipline could be greater without a new budget resolution than with one. Why is fiscal discipline at the federal level so important for low-income families these days? Because Congress has revealed a most undisciplined appetite for tax cuts that a new budget resolution would be likely to whet. The huge tax cuts of 2001 and 2003 – not increases in spending – helped turn a record surplus into a massive deficit. Losing still more tax revenue will increase the pressure to cut federal spending. Who will pay the price? The heaviest burden will almost certainly be borne by low-income and vulnerable Americans. Programs such as Section 8 housing, child care subsidies, food and nutrition programs, Head Start, Medicaid and the State Children’s Health Insurance Program will all be at greater risk.

For More Information
Center on Budget and Policy Priorities: Fiscal Discipline Likely to Be Greater Without a New Budget Resolution
OMB Watch: Will There Be a Budget Resolution?

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