Uncertainties Ahead for Federal Spending
Kenneth Gold | January 28, 2015
For federal departments and agencies, the most important issue in the First Session of the 114th Congress will be the shape of the FY16 congressional budget resolution, which will set the discretionary spending levels for the Appropriations Committees. New House Budget Committee Chair Tom Price of Georgia recently told a Heritage Foundation Conference that he intends to write a House Budget Resolution that will achieve a balanced budget within a decade, and possibly sooner.
What’s critical is how the budget resolution goes about achieving those savings. Option #1 is reform of one or more of the big three entitlement programs (Medicare, Medicaid and Social Security). Option #2 is increased revenue. Option #3 is further cuts to discretionary spending. Of course, some combination of the three is also possible.
The current budget process mandates that the House and Senate each pass a budget resolution, and that the chambers agree on a congressional budget resolution by April 15 of each year. The major purpose of the congressional budget resolution, although it has other, secondary purposes, is to set the annual discretionary spending level, known as the 302(a) allocation.
In FY14, the discretionary spending levels in the House and Senate versions of the Budget Resolution were $91 billion apart, and to no one’s surprise, the competing versions never went to conference. With no agreement on discretionary funding, and no appropriations bills, we had a 16-day government shutdown to begin the fiscal year. That was followed, however, by a bipartisan budget compromise, the Ryan-Murray agreement, that split the difference between the competing discretionary numbers for FY14 and FY15, and suspended the sequester for two years, increasing spending by about $9 billion per year.
Because Ryan-Murray set the discretionary spending levels for FY15, there was no real need for a congressional budget resolution last year, and the Democratic Senate Budget Committee didn’t even attempt to write one. The House however, under Budget Committee Chair Paul Ryan, did write an FY15 Budget Resolution, which in April narrowly passed in the House on a party line vote.
There are two critical factors to consider regarding FY16 spending. First, the Ryan-Murray agreement expires at the end of September, and without further congressional action, sequester level spending will return for FY16. Second, because both chambers are in Republican control, it’s certain that Congress will pass a congressional budget resolution, which is a joint resolution, and therefore doesn’t go to the president for his signature.
The $91 billion question will be at what level the FY16 Budget Resolution sets discretionary spending. The FY15 Ryan budget pledged to balance the federal budget in 10 years, and cut $5 trillion in spending by repealing Obamacare, transforming Medicare, and slashing Medicaid and other health care programs, food stamps, education, and farm programs.
It slashed overall discretionary spending, but because it increased defense spending, cuts to non-defense spending were even more drastic. Compared to the 2011 BCA spending caps for FY15, defense spending would have gone up by $483 billion, while non-defense spending would have been cut by $791 billion. One estimate calculated that HHS spending would have been cut by as much as 40% under the Ryan budget.
But like his previous year’s budget, which set discretionary spending $91 billion lower than the Senate Budget Resolution, it was never intended to be considered by, let alone pass the Democratically controlled Senate, and therefore was essentially a political document. This year is different – it’s difficult to imagine that Congress won’t agree on a budget resolution, and new House Budget Committee Chair Tom Price has stated that he intends produce a budget by the end of March. There’s also a new Budget Committee Chair in the Senate, Mike Enzi of Wyoming, who’s yet to reveal his priorities regarding the budget.
In addition to cutting, or at minimum not increasing discretionary spending, Congressman Price has already indicated that he’s willing to propose cuts not only to Medicare and Medicaid, but also to Social Security, long considered the third rail of American politics, which even Congressman Ryan avoided. It’s highly unlikely that new Budget Committee Chair might entertain raising taxes as a way to increase revenue. He favors tax cuts, not increases, and if anything is even more conservative that his predecessor at the Committee.
Congressman Price has also stated that he views the mid-year expiration of the debt ceiling as an opportunity for Republicans to demand major spending cuts in exchange for a debt ceiling increase – something that Speaker Boehner recently backed away from, and Senate Majority Leader Mitch McConnell has explicitly ruled out. In December, Congressman Price suggested that he supports returning to the so-called “Boehner rule” that would require spending cuts equal to every dollar increase in the debt limit.
It’s important to bear in mind that while the congressional budget resolution sets the overall cap on discretionary spending, the Appropriations Committee still sets the spending levels for the Appropriations Subcommittees (the 302(b) allocations). And that if Congress passes the 12 Appropriations bills, something they haven’t done in more than two decades, they need to go to the President for his signature. Still, the first upcoming “Price budget”, will be an extremely significant first step in the process that will hopefully conclude before the end of the fiscal year.