‘Line’ Items: Valentine’s/Budget Day Edition
Share the Love – Today’s the big day: messages will be sent, some will be showered with love, and others will feel left out. Of course, today is Budget Day, with the White House releasing its Fiscal Year 2012 budget request. [We also have a nagging feeling we should be sending flowers to loved ones for some reason.] The release of the budget will set off a debate over priorities and fiscal responsibility for next year. Meanwhile, thanks to the dysfunction of our budget process, Congress will also be debating federal spending for the rest of this year at the same time. CRFB will keep you abreast with updates and analysis.
From the White House to Congress, with Love – The White House today will release its budget request for FY2012. We provided a handy list last week of items to be included in the budget. And we offered our suggestions on what we’d like to see in the budget earlier. In the budget, President Obama will try to balance investing in areas he identified to boost America’s global economic competitiveness with addressing mounting federal budget deficits and national debt. Administration officials have argued that the request takes steps to stabilize the budget outlook and move to fiscal sustainability. It will face opposition in Congress, especially in the House, where leaders no doubt will contend it doesn’t go far enough in reducing spending. The budget reportedly forecasts a $1.65 billion deficit this year, a record in dollar amount and more than what the CBO recently predicted. It also will say that the FY2012 deficit will be $1.1 trillion if the budget is implemented. The budget also projects that the national debt will increase by $7.2 trillion over 10 years if it is adopted, but will increase by an additional $1.1 trillion if it isn’t.
Some Get Roses – The budget is expected to include additional spending for the areas that President Obama targeted in his State of the Union address last month for investment – education, infrastructure and innovation. Education funding reportedly will increase by 11 percent. The budget also calls for establishing a National Infrastructure Bank and includes a $50 billion up front investment as part of a long-term, $556 billion plan. The National Institutes of Health gets a $1 billion boost in the budget as well.
Others, Not So Much – The five-year freeze on discretionary spending that President Obama announced in his State of the Union speech will result in many agencies and programs seeing spending cuts. Heating assistance for the poor, community service block grants, and airports are among those expected to get hit with reductions.
Forget Me Not – Apparently the budget does address two issues that have long muddied the budget picture. The budget calls for a three year Alternative Minimum Tax (AMT) patch that will protect middle-class taxpayers from having to pay the tax. The cost is paid for by limiting some tax breaks for wealthier taxpayers, such as the deductions for mortgage interest and charitable contributions (see our recommendations for reforming tax expenditures here). It also will pay for a so-called “doc fix” by cutting $62 billion in federal health care spending to avert a 30 percent decrease in Medicare physician payments (see our health care recommendations here).
Forsaken? – The budget is not likely to address Social Security reform, despite warnings that the program faces a long-term shortfall and that action now will make needed changes less painful (see our Social Security recommendations here). The decision came after an internal debate over the issue within the administration. The president’s own Fiscal Commission provided recommendations to shore up the program’s finances. Many of the Commission’s budget suggestions are not expected to be included in the budget plan.
Congress to White House: Easy on the Treats – A skeptical Congress will consider the FY2012 budget request at the same time it debates spending for the rest of this year. Late Friday the House Appropriations Committee released a continuing resolution (CR) to fund the government for the rest of the fiscal year. It seeks to fulfill Republican campaign promises by cutting $100 billion from the president’s FY2011 budget request, which was never enacted. The CR was revised after many conservatives objected because it did not cut enough. It now includes $19 billion in security-related cuts among other reductions. House leaders plan a lengthy debate on the CR this week with three days of debate starting Tuesday, culminating in a planned vote on Thursday. House leaders have promised an open rule process that will allow amendments on the floor, providing opportunities to attach more spending cuts. The divided Senate will be a tough sell for the House package. The current CR expires on March 4 and must be extended before then in order to avert a government shutdown. The inability to pass a budget for this year has exposed the dysfunction of the budget process. The Peterson-Pew Commission on Budget Reform provided recommendations late last year to fix the process to make it more effective and transparent.
Courters Come A-Callin – With the release of the budget, the yearly parade of administration officials appearing before congressional committees to defend the package will commence this week. Treasury Secretary Tim Geithner and OMB Director Jack Lew particularly will be spending plenty of time on Capitol Hill. See below for schedules and details.
Don’t Be Left Out – What would you do about the budget? CRFB gives you more than one way to express yourself. Enter our fiscal video contest this week to have the opportunity to have your voice heard in Washington and possibly win a $1,000 prize. You can also do our online budget simulator and come up with you own budget plan.
Warm, Fuzzy, Bipartisan Feeling in the Senate – A bipartisan group of senators, including Sens. Tom Carper (D-DE), Mark Udall (D-CO), Michael Bennet (D-CO) John McCain (R-AZ), Rob Portman (R-OH) and Dan Coats (R-IN) proposed legislation last week granting the president enhanced rescission abilities. The bill will allow the president greater powers to target and remove wasteful spending. It is an attempt to institute something akin to a line-item veto that can pass Constitutional muster.
The House Gets in the Bipartisan Act Too – A bipartisan group of House members – Reps. Jim Cooper (D-TN), Aaron Schock (R-IL), Mike Quigley (D-IL), and Joe Walsh (R-IL) – last week unveiled legislation to create a bipartisan commission to review government programs and identify and abolish those that are duplicative or inefficient. Hopefully, the trend of thoughtful, bipartisan proposals will continue.
YouCut Doesn’t Feel the Love – The first spending reduction bill inspired by the House Republican’s “YouCut” initiative failed last week as a bill to return $179 million that the US overpaid to the UN failed to garner the needed two-thirds majority under suspension of the rules. Congressman Peter King (R-NY) led the effort to defeat the bill because he feared it would impair efforts to improve security at UN Headquarters in New York City.
Key Upcoming Dates
February 14 – White House unveils its FY 2012 budget at 10:30 am.
February 14 – Treasury Department auctions $32 billion in debt securities (13 week).
February 15 – House Budget Committee Hearing on the President’s FY 2012 Budget with OMB Director Jack Lew at 10 am.
February 15 – House Ways and Means Committee Hearing on the President’s FY 2012 Budget with Treasury Secretary Tim Geithner at 1 pm.
February 15 – Senate Budget Committee Hearing on the President’s FY 2012 Budget with OMB Director Jack Lew at 2 pm.
February 15 – Senate Finance Committee Hearing on the President’s FY 2012 Budget with Health and Human Services Secretary Kathleen Sebelius at 2:30 pm.
February 15 – Department of Commerce releases retail sales figures for January.
February 15 – EU Economic and Finance Ministers meet in Europe. Fiscal governance is on the agenda.
February 16 – House Ways and Means Committee Hearing on the President’s FY 2012 Budget with Health and Human Services Secretary Kathleen Sebelius at 10 am.
February 16 – Senate Finance Committee Hearing on the President’s FY 2012 Budget with Treasury Secretary Tim Geithner at 10 am.
February 16 – House Budget Committee Hearing on the President’s FY 2012 Budget with Treasury Secretary Tim Geithner at 2 pm.
February 16 – House Ways and Means Committee Hearing on the President’s FY 2012 Budget with OMB Director Jack Lew at 2 pm.
February 16 – Department of Commerce releases housing starts data for January.
February 16 – Federal Reserve releases industrial production numbers for January.
February 17 – House of Representatives will vote on a new continuing resolution (CR) funding the government that significantly cuts spending for the rest of this year.
February 17 – Senate Budget Committee Hearing on the President’s FY 2012 Budget with Treasury Secretary Tim Geithner at 10 am.
February 17 – Treasury Department auction of debt securities ($39 billion, of which $30 billion will be 26 week and $9 billion will be 30 year TIPs – inflation-protected securities).
February 21 – Deadline for submitting entries to CRFB's "Voices of America" fiscal video contest.
March 4 – The current continuing resolution (CR) funding government operations expires. Congress must adopt spending bills funding the federal government for the rest of FY 2011 by then or pass another stopgap measure.
April 5 - May 31 – Period in which Treasury Secretary Geithner says the U.S. will likely reach the debt ceiling. (Revised)