Week Ending June 3, 2011
Budget Discussions Creep Forward as House Rejects Debt Ceiling Increase
Vice President Biden continues to meet with bipartisan congressional leaders to discuss how to resolve raising the debt ceiling and reducing the deficit. No official details have been released, but a preliminary agreement to cut $1 trillion in spending seems to have bipartisan support, although some are still talking about cuts in excess of $2 trillion. Republicans continue to strongly oppose raising revenues, which House Republicans reiterated in their meeting with President Obama this week. The President also met with congressional Democrats and Senate Republicans to discuss the budget impasse. House Speaker John Boehner (R-OH) expressed concern over the slow pace of budget talks and proposed that he and the President meet separately in order to reach an agreement by the end of July.
In what has been an ever-escalating game of chicken, the U.S. House of Representatives rejected, by a vote of 97 to 318, a proposal that would have raised the debt limit ceiling without any spending cuts. The Treasury Department has taken emergency steps to extend the nation’s ability to meet its obligations through August 2. On Thursday, Moody’s Investors Service warned it might downgrade the U.S. government’s triple-A credit rating due to the debt ceiling stalemate. The staged vote on the “clean” debt limit bill was held so that it would fail and “prove” that a bill to increase the debt ceiling would need to include draconian spending cuts.
House Judiciary Committee Adjourns Without Voting on Balanced Budget Amendment
The House Judiciary Committee adjourned today without voting on a constitutional amendment (H.J. Res.1) which would require a balanced budget every year, regardless of the state of the economy. It would cap spending at an unreasonably low percentage of the gross domestic product (GDP), making it nearly impossible to attain the required supermajorities of each house of Congress to raise taxes, exceed the debt ceiling, or waive the rules. All Republicans except two voted for an amendment to cap spending at an even lower level than the original 20% of GDP, lowering it to 18%. At 20%, current federal domestic discretionary programs would be slashed by 70%. Federal spending has not been at 18% of GDP since prior to 1965 when Medicare was enacted. Democrats on the panel attempted to carve out critical programs from the cap and exclude Medicare and Social Security, but those amendments were defeated. AFSCME strongly opposes H.J.Res. 1, which would have a devastating impact on the U.S. economy. The Judiciary Committee will continue its deliberation on the balanced budget amendment after the House recess next week.
House Passes Homeland Security Funding Bill
On Thursday, the House passed its bill (H.R. 2017) funding Homeland Security programs for FY 2012 by a vote of 231 to 188. The bill provides $40.6 billion in discretionary spending for the Homeland Security Department, a 2.6 % reduction from the current level and 6.8 % less than President Obama requested. The bill cuts spending for first-responder grants by $2.1 billion compared with FY 2011, but several amendments passed that were aimed at restoring some funds for these grants. One adopted amendment would increase firefighter grants to $670 million, nearly doubling the bill’s original $350 million. Another adopted amendment would remove the bill’s limitations on which cities can receive grants for densely populated areas viewed as being at high risk of attack. However, another amendment that would have increased funding for state and local grant programs by $337 million failed. In a victory for labor, House members rejected an amendment offered by Rep. Paul Gosar (R-AZ) that would have prohibited the use of bill funds to comply with the Davis-Bacon local prevailing wage requirements. However, the House adopted an amendment offered by Rep. Todd Rokita (R-IN) that will block funds in the bill from being used to implement the Obama administration’s plan to award collective bargaining rights to screeners at the Transportation Security Administration. Both leaders of the Homeland Security authorizing panel – Reps. Peter King (R-NY) and Bennie Thompson (D-MS) – opposed the bill.
House Passes Bill Allowing State Child Welfare Demonstration Projects
This week, the House passed a bill (H.R. 1194) by voice vote sponsored by Rep. Jim McDermott (D-WA) that would renew the Department of Health and Human Services’ (HHS) authority to approve demonstration projects in states’ child welfare programs. This authority was first provided in 1997 but expired in 2003. The bill would allow HHS to authorize 10 new demonstration projects each year from fiscal years 2011-2016. The House passed similar legislation by voice vote in the previous Congress, but the Senate did not act on it. Senate Finance Committee Chair Max Baucus (D-MT) and ranking member Orrin Hatch (R-UT) have said they hope their committee will soon consider the companion Senate bill (S. 1013), which they introduced jointly in May.
Fiscal Survey Finds States’ Revenues and Expenditures Below 2008 Levels
While state budgets are slowly recovering from the deep recession, states are still projected to spend $18 billion less in FY 2012 than they did in FY 2008, according to the biannual report, The Fiscal Survey of States, released this week by the National Governors Association and the National Association of State Budget Officers. Also, total General Fund revenues are 3.6 % below their pre-recession highs despite tax increases in several states. According to the report, states face a host of budget challenges in FY 2012, including the winding down of Recovery Act fiscal relief, continued high levels of unemployment, continued high need for health care and social services, and the continued impact of the economic downturn on revenues. Although fewer states engaged in mid-year budget cutting than in FYs 2009 and 2010, 23 states made $7.8 billion in mid-year cuts in 2011.
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