Federal Budget Update
The 112th Congress that convened January 4, 2011 will be heavily involved federal budget issues, and could have dire implications for state and local government as Republicans seek to reduce government at all levels. Already the House leadership—led by new Speaker John Boehner (R-OH) and incoming House Budget Committee Chairman Paul Ryan (R-WI)—have vowed to cut $100 billion from the federal budget. Republican leadership has already pushed through a new set of rules designed to make it easier to cut spending, but have deflected any effort to restore tax levels and revenues that would decrease the federal deficit.
The Republican budget plan, Roadmap for America’s Future, drafted by Rep. Ryan, calls for radical policy changes that would cripple essential government programs while cutting taxes for the wealthiest Americans, resulting in a massive transfer of resources from the broad majority of Americans to the nation’s wealthiest individuals.
Some of the tax cuts for the wealthy have already been enacted with the continuation of the Bush-era tax cuts, but now come the budget cuts. The Ryan plan would raise taxes for most middle-income families, privatize a substantial portion of Social Security, eliminate the tax exclusion for employer-sponsored health insurance, end traditional Medicare and most of Medicaid, and terminate the Children’s Health Insurance Program. The Roadmap also calls for cutting domestic spending by starving funding for transportation, education, public safety, housing, economic development, social services and more.
In late January President Obama will submit his federal budget recommendations for Fiscal Year 2012, which begins October 1, 2011. The House and Senate Budget Committees will then prepare their own recommended budgets and will try to come together on a final plan. It is highly unlikely, however, that the Republican-controlled House and Democratic-controlled Senate will reach an agreement on an overall budget framework. Lacking an agreed-upon budget framework, it will be difficult for Congress to proceed on the twelve individual spending bills. This will force the federal government and all its programs and services to operate under temporary spending measures called Continuing Resolutions (CR), which is what they have been doing this year. As a likely result, Democrats may be forced to agree to hold down spending, and in exchange Republicans will agree not to shut down the federal government.
But before the budget process wraps up, a major showdown is likely to occur when the current CR expires in early March. Republicans have control of the House (and the budget process) for the first time since 2006, and will demand further spending cuts before they will agree to another extension.
Additionally, we expect a fight to occur when Congress deals with raising the federal debt limit. The current debt limit is $14.3 trillion, which the government is expected to hit early this spring. Unless the debt limit is increased, the federal government would be unable to borrow and thus unable to pay for government services. Some experts believe that congressional Republicans and Democrats, along with the White House, could forge a deal on raising the debt limit. Some lawmakers, particularly those supported by the Tea Party, vehemently oppose this possibiliy . Additionally, any deal on the federal debt limit will no doubt include spending cuts.
For AFSCME members and state and local governments, the implications of these fights over the federal budget and spending are dire. In the words of John E. Petersen of GOVERNING magazine and the George Mason School of Public Policy, when the federal government starts cutting spending, “look out below.”
Department of Legislation
January 2011
