An Early Look at Prospects for the FY16 Budget

Kenneth Gold | March 31, 2015

On Wednesday last week the House passed its version of the FY16 budget resolution; and on early Friday morning the Senate passed its version. Modern budget resolutions are highly partisan vehicles, so one would assume that they’d pass easily in each chamber. And with one party in control of both the House and the Senate, one would also assume that reconciling the two versions would be relatively easy as well.

Until late last week, however, it wasn’t clear that either chamber could pass a budget resolution on the floor. In fact, it wasn’t even clear that the Senate could pass its version in committee. The Budget Act requires that the House and Senate agree on a budget resolution by April 15. so at this point the chambers have roughly two weeks to bridge their differences, although they just went into recess, and won’t return until April 13th or 14th.

Since 1975, when the 1974 Congressional Budget Act first provided for adoption of a congressional budget, Congress has passed at least one budget resolution in 31 of the last 39 years (for a complete history of congressional budget resolutions, see CRS Report RL30297).  Four of the nine years in which Congress has failed to pass a budget resolution, however, have occurred since 2010.

In 2013, although both chambers passed FY14 budget resolutions, there was never any hope of conferencing the two versions to actually pass a congressional budget resolution.  In that year, with Republicans controlling the House and Democrats controlling the Senate, the top line discretionary spending numbers between the two chambers were $91 billion apart.  In the absence of any agreement on spending, the appropriations process broke down, with the eventual result being a 16-day government shutdown.

The 2013 Ryan-Murray agreement in large part pushed the discretionary spending debate aside for two years by raising the top line spending numbers for FY14 and FY15, and nullifying the sequester.  Ryan-Murray didn’t extend to FY16, however, and the caps and the potential sequester will return in the absence of another compromise.  At that time, however, party control of Congress was split, and House Republican fiscal hawks understood that getting their priorities through the Democratic controlled Senate was a non-starter.

In the 114th Congress Republicans are in control of both chambers, and there is considerable pressure on the leadership in both chambers to prove that the party can govern, and passing a congressional budget resolution is a high priority.  In addition, passing a budget resolution allows Congress to use something called the reconciliation process to pass certain kinds of legislation using only a simple majority to pass bills in the Senate, rather than the 60 votes normally required.

Barring any surprises, it now appears that the heavy lifting is behind them, and that Republicans are on course to pass a congressional budget resolution by the April 15 deadline.  But getting to even this point wasn’t an easy path, and it’s not yet clear what this all means for FY16 spending.

The major challenge for the Republican leadership in both chambers, but even more so in the House, is reconciling the spending priorities of fiscal hawks with defense hawks within the party. Fiscal hawks want to keep spending at or below the levels agreed to in the 2011 Budget Control Act, which put in place hard caps on both defense and non-defense discretionary spending, as well as the sequester if spending exceeds those caps.

Defense hawks want to increase defense spending, but are subdivided among those who are willing to also raise non-defense discretionary spending, and those who want to increase defense spending but at the same time cut non-defense spending. The majority of Democrats in both Chambers and the President agree on the need to increase defense spending, but also want to increase non-defense spending.

The President’s budget requests $612 billion for defense, with $561 billion in base spending, which is $38 billion over the BCA cap, plus an additional $51 billion in “emergency” Overseas Contingency Operations (OCO) funds.  The House budget stays within the $523 billion BCA cap, but adds $90 billion in OCO funds, coincidentally exceeding the President’s request by $1 billion.

With this formula, Republicans can claim that they’re increasing defense spending more than the President, and staying under the caps, as OCO funding isn’t counted under the BCA caps, although it does increase the deficit.  After considerable hand wringing the Senate basically went along with the House plan.

Both versions promise to balance the budget in ten years or less, and therefore need to identify roughly $5 trillion to $5.5 trillion in deficit reduction. Both plans claim massive savings in health care spending, primarily by repealing the Affordable Care Act, which would need to be agreed to by the President, as well as major savings in reductions to Medicaid, Medicare, and SNAP (food stamps).  However, there would still need to be massive cuts in non-defense discretionary spending in order to reach the promised balanced budget by 2025.  The House plan would increase defense spending by $387 billion over ten years, and cut non-defense spending by a whopping $759 billion, which is 14% below the very austere levels set by the BCA. The Senate plan proposes to cut non-defense spending by only $236 billion.

Attention now turns to House and Senate conferees, as they try and reconcile the differences between the two chambers’ budget resolutions. But satisfying the demands of fiscal hawks with those of deficit hawks, and in some way fulfilling the broader goal of balancing the budget in ten years remains an enormous challenge.

Ken Gold is director of the Government Affairs Institute

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Categories: 114th Congress, Budget and Appropriations, Congressional Update, Federal Budget and Appropriations, Updates