Week Ending January 28, 2011
House Starts to Vote on Remainder of This Year’s Federal Budget
The House voted 256-165, largely along party lines, to approve House Resolution 38, which would empower the Budget Committee Chairman to set non-security spending for the remainder of the current fiscal year 2011 federal budget at fiscal year 2008 levels or less. No Republicans voted against the Resolution, and only 17 Democrats voted for it. Given that approximately 33% of the non-security budget goes to state and local governments, the Resolution would result in deep cuts in federal funding for vital public services. Opponents highlighted that the Resolution fails to define ‘non-security’, does not set a specific spending amount, and does not even include any funding levels. Furthermore, the Resolution grants one lawmaker, Budget Committee Chairman Paul Ryan (R-WI), the power to set spending levels without another House vote. Former Secretary of State Colin Powell said, "I'm very put off when people just say let's go back and freeze to the level two years ago. Don't tell me you're going to freeze to a level. That usually is a very inefficient way of doing it. Tell me what you're going to cut, and nobody up there is being very candid about what they are doing to fix this problem."
Senators Introduce Constitutional Amendment to Balance the Budget
Sens. Orrin Hatch (R-UT) and John Cornyn (R-TX) introduced S. J. Res. 3, a joint resolution proposing an amendment to the Constitution of the United States to balance the federal budget. The proposed amendment was introduced with 19 other Republican senators as cosponsors. It would mandate that spending not exceed revenues in any given fiscal year. It would also limit federal spending to 20% of gross domestic product and force any legislation that raises taxes to get two-thirds approval in both the House and the Senate. The requirements could be set aside for emergency purposes if the United States is at war or in a military conflict, as well as with the support of two-thirds of both houses of Congress. Several Democratic members of Congress raised concerns about the proposed amendment and its potential impact on Social Security. Sen. Dick Durbin (D-IL) and Rep. Chris Van Hollen (D-MD) said they believed balancing the budget should not involve the Constitution. Several similar measures have been introduced in the House of Representatives as well.
Opposition Strengthens Against Congressional Proposals to Permit State Bankruptcy
There is widespread and growing opposition to federal legislation that would permit states to declare bankruptcy. This week the National Governors Association, the Republican Governors Association, many individual governors, other elected and appointed state officials, key House Republicans, and even House Republican Majority Leader Eric Cantor (R-VA) announced opposition to the idea of permitting states to declare bankruptcy.
The National Governors Association stated: "The nation’s governors strongly oppose federal proposals to provide states with bankruptcy protection. Allowing states to declare bankruptcy is not an authority state leaders have asked for nor would they use. The mere existence of a law allowing states to declare bankruptcy only serves to increase interest rates, raise the costs of state government and create more volatility in financial markets." A spokesperson for the Republican Governors Association, said "GOP governors oppose state bankruptcies and a federal bailout of states because states should be forced to live within their means." The Washington Post reported that House Majority Leader Cantor said he "opposes changing the law to allow fiscally pressed states to seek bankruptcy protection." The Associated Press reported that Republican House Judiciary Committee Chairman Lamar Smith (R-TX) also "expressed misgivings about the idea. In a written statement, he cited constitutional and policy concerns."
California State Treasurer Bill Lockyer said: "To the folks in Congress cooking this baloney: Don’t bother. States didn’t ask for it. We don’t want it. We don’t need it. Bankruptcy would devastate states’ ability to recover from the recession and make the infrastructure investments that create good jobs. It would inflict severe injury on taxpayers. Advocates of this preposterous idea want one thing above all – to see government go up in flames and, with it, the lives of a certain class of working people they don’t like. Thanks, but we’ll pass on the Gingrich Kool-Aid." Lockyer also said "Killer bees, space aliens and now it's the invasion of the bankrupt states. The truth is, no state wants to declare bankruptcy, no state needs to declare bankruptcy, and no state would."
Despite the growing opposition, there remains continued Congressional interest in this issue. Chairman Smith (R-TX) and others are considering related Congressional hearings as soon as mid-February.
President Obama Delivers State of the Union Address
President Obama’s State of the Union address covered many issues of importance to AFSCME members, including job creation, the federal budget, tax reform, Social Security, and reorganizing the federal government. First and foremost, President Obama focused on jobs. He said the stakes are vital - "whether new jobs and industries take root in this country, or somewhere else. It’s whether the hard work and industry of our people is rewarded." To create jobs, he stressed innovation, education, rebuilding America’s infrastructure, reforming the tax code, and reducing the federal debt – and offered proposals on each.
Against the backdrop of calls by Republican congressional leaders to make even more severe cuts, President Obama proposed freezing annual domestic spending for the next five years, a reduction of more than $400 billion over the next decade. We are concerned about the impact that the President’s proposal could have on state and local services, although he stressed the need to be selective in cuts when he stated, "Let’s make sure that we’re not doing it on the backs of our most vulnerable citizens" and urged investments in innovation, education, and infrastructure to create jobs.
On tax reform, Obama urged Congress to simplify the individual tax code and to reject a permanent extension of the Bush-era tax cuts for the wealthiest two percent of Americans. "Before we take money away from our schools or scholarships away from our students, we should ask millionaires to give up their tax break. It’s not a matter of punishing their success. It’s about promoting America’s success." He also urged Congress to close corporate tax loopholes: "Level the playing field. And use the savings to lower the corporate tax rate for the first time in 25 years - without adding to our deficit."
On Social Security, Obama said, "we should also find a bipartisan solution to strengthen Social Security for future generations. We must do it without putting at risk current retirees, the most vulnerable, or people with disabilities; without slashing benefits for future generations; and without subjecting Americans’ guaranteed retirement income to the whims of the stock market."
On reorganizing the federal government, Obama said, "In the coming months, my administration will develop a proposal to merge, consolidate, and reorganize the federal government in a way that best serves the goal of a more competitive America. I will submit that proposal to Congress for a vote –- and we will push to get it passed."
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