Budget Impasse Already Seems Likely
By the end of September when the fiscal year ends, Congress must have reached an agreement on federal spending and approved a budget, or risk a government shutdown. But given the hyper-partisan disagreements in Congress and some policymakers’ apparent unwillingness to compromise, we know this will be difficult. We are already seeing a potential impasse.
Tell Congress to write and pass a budget that strengthens the economy and puts people back to work; maintains a strong safety net; and provides the education, health care, infrastructure investments, environmental protections, R&D, and cultural enhancements that we need and rely upon and which will position the nation for a stronger future.
The Budget Process
Writing the budget is a multi-stage, year-long process. But the details begin to appear when subcommittees of the House and Senate Appropriations Committees do their work. This is happening now. In the next stage, the subcommittees’ draft legislation is presented to the Appropriations Committees. Then the legislation approved by these committees is sent to the full House or Senate where, after deliberation, a budget is approved by each house. Differences between these two versions of the budget must be reconciled and the final bill sent to the president for his signature. Only then do we have a budget. So there is still a very long way to go. But the initial budget proposals reveal the extreme spending cuts that some Members of Congress would like to see.
Last year, Congress approved a series of deep, across-the-board spending cuts (the “sequester”) that began in January, 2013, and will continue for another nine years. Many in Congress would like to reverse these cuts which, if unchanged, will continue to slash vital government functions and, in 2014 alone, destroy an estimated 900,000 jobs. These sequester cuts were in addition to a different 10-year series of cuts of nearly equal size enacted in 2011.
But some members of Congress are proposing not only to continue the sequester cuts but to deepen them. The House of Representatives’ Appropriations subcommittees are proposing extreme cuts for many government departments and activities:
- cut the Environmental Protection Agency by 34%;
- cut the Fish and Wildlife Service by 27%;
- cut funding for the National Endowments for the Arts and Humanities by 49% and Smithsonian Museums and the National Gallery of Art by 19% ;
- totally eliminate funding for the Corporation for Public Broadcasting;
- cut operations of the State Department by 15%;
- cut money for Pell grants (money for low-income students for higher education) by 16%;
- cut funding for the Department of Labor by 13%;
- cut money for Amtrak one-third;
- cut funding for the Internal Revenue Service by 24%; and
- cut Community Development Block Grants (that go to cities) by roughly 50%.
So rather than reversing the harmful across-the-board spending cuts (the “sequester”) that began in January, 2013, some members of Congress propose to do even more damage.
Cuts Not Needed for Deficit or Debt Reduction
Federal discretionary spending (the kind of spending that budget subcommittees in the House are proposing to cut further) is already at a record low level. Even without any additional cuts, it is projected to decline by 4% between 2013 and 2014. Moreover, under existing budget law, discretionary spending will fall by one-third over the next ten years even though it is already smaller than the average over the past 40 years.
Cuts are not needed for deficit reduction. Without any additional spending cuts, the deficit in 2014 is currently projected to be 3.4% of GDP, down from a peak of 10% during the worst of the economic crisis. This is a very acceptable amount and probably smaller than it should be given our high unemployment and the weak state of the economy. Moreover, for at least the next eight years, the deficit will be smaller than it is now. (During those years we must do more to reign in future health care spending by the government, employers, and households, but that is not the focus of the cuts currently proposed.) Because annual deficits are shrinking, after 2014 total federal government debt (not just the annual deficit), will decline as a share of the national economy without any further spending cuts beyond those already enacted into law.
Additional spending cuts will further damage the already weak economy and harm the programs and services that our society needs.
The Senate is expected to oppose many of the proposed spending cuts coming from the House of Representatives. So it is very possible that when the current fiscal year ends -- September 30, 2013 – there will be no new budget for FY 2014. Without a new budget, one of two things happens. Usually, Congress passes a Continuing Resolution that extends the previous year’s budget into the next year until the new budget is completed. In the past this has often been a fairly straight-forward, uncomplicated process. But if this authorization is not provided, the government shuts down.
What might happen this year if the Senate rejects the extreme budget cuts that will likely be proposed by the House? Will Congress pass a Continuing Resolution? It may be very difficult.
There is a letter circulating in the Senate that has already been signed by leading GOP senators. Signers agree not to approve any spending measure to keep the government functioning after September 30 if it includes any money to implement the Affordable Care Act, so-called ObamaCare. (Major parts of the new law go into effect in January, 2014, and the months leading up to its onset are a critical time for setting up the program; also people without insurance can begin enrolling for the new coverage beginning in October, 2013.) So this conflict in the Senate may mean that, after September 30, we could have either a functioning government and non-functioning ObamaCare program, or a non-functioning government and a functioning ObamaCare program. This is not a good choice.
Debt Ceiling Will Need to be Raised
Congress will also need to raise the debt ceiling in the fall. Members of the House are saying they will not raise the debt ceiling without, according to House Speaker John Boehner (R-OH), “real cuts in spending” – as if large cuts have not already happened – or large reductions in Medicare and/or Social Security, or large tax cuts.
So it looks like the budget crisis this fall might be even worse than in the past.
It is time to tell Congress that these overly partisan budget battles are harming the country. Urge Congress to write and pass a budget that strengthens the economy and puts people back to work; maintains a strong safety net; and provides the education, health care, infrastructure investments, environmental protections, R&D, and cultural enhancements that we need and rely upon and which will position the nation for a stronger future.
More information, read House G.O.P. Sets New Offensive on Obama Goals by Jonathan Weisman, New York Times, July 23, 2013.