Fiscal 2011 Budget Debate: Appropriations and Reconciliation

Posted January 25, 2010 at 3:41pm

Given what is about to happen on the budget this year, you really have to feel for the appropriators. Even though the deficit is far less their fault than the other parts of the budget, the tea leaves indicate they’re going to be asked to play a lopsided role in dealing with it in the debate that will get under way Monday when Obama’s new budget is sent to Congress.

[IMGCAP(1)]This is hardly the first time that much of the focus of the budget debate unreasonably will be on the Appropriations committees and discretionary spending. As almost every former and current appropriator will tell you, despite the fact that much of the deficit has been caused by revenue and mandatory spending changes and not discretionary spending, the programs within their jurisdiction are the ones that get the most scrutiny and are under the greatest pressure every year. It’s only a matter of time before the old standbys of “waste, fraud and abuse— and “pork-barrel spending,— both of which only apply to spending within the jurisdiction of the Appropriations committees, again start to be thrown around inaccurately as the root of the deficit problem and the road to balanced budget salvation.

But appropriators and appropriations will be more under the gun this year than in the recent past because they will be the only deficit-reduction game in town.

If, as now seems likely, some type of budget commission is created, major changes in mandatory spending and revenues are likely to depend on what, if anything, it recommends. Regardless of whether it’s created by presidential fiat or legislative action, if it’s able to agree on anything, the commission is likely not to report those recommendations until after fiscal 2011 begins on Oct. 1. That almost certainly means that Congress will take no action on mandatory spending reductions or revenue increases this year.

In fact, it appears that the only major revenue changes on the horizon for the year ahead are reductions from what would otherwise occur if current law remains unchanged and, therefore, the deficit increases. As the president first proposed during the 2008 presidential campaign and then again in his 2010 budget, most of the tax cuts enacted during the Bush administration, which are set to expire at midnight Dec. 31, will be extended at some point this year so that they last at least through calendar 2011. That now seems more likely to include the three major provisions the president didn’t want to extend — the top marginal rate on individuals, capital gains and dividends. As a result, the revenue loss compared to the “baseline— — what would be collected if the law remained unchanged and the provisions expired as scheduled — will be greater than was previously assumed and the deficit will be higher than it otherwise would be.

The most interesting question will be whether these tax changes are done through the reconciliation process.

In theory that shouldn’t be necessary. There’s little doubt that the votes will exist in the House for standalone legislation that would extend expiring tax cuts. But the extensive use — or abuse — of the filibuster on health care reform and other issues has so poisoned the atmosphere in the Senate that Democrats appear increasingly unwilling to allow that tactic to be a possibility on a tax-cut extension this year in that chamber.

The concern is that Republicans will use the threat of a filibuster as leverage to add other things to a tax-cut bill. A filibuster would change the debate from the tax cuts being extended to the ones prevented from being considered. That would eliminate the political value of the extension for Democrats in two ways. First, they would like to campaign on having cut taxes rather than preventing a tax cut from being put in place. Second, they don’t want to have to defend the even higher deficits that Republicans would try to make an issue if other revenue-reduction provisions were included.

As a result, a revenue reconciliation bill — which can’t be filibustered, was the way Republicans enacted these revenue provisions in the first place and, therefore, removes most of the potential political problems — is the likely vehicle for the tax bill that will be considered in the months ahead.

That brings the budget debate firmly back to what at that point will be the only game in town: appropriations.

There are strong but still unconfirmed indications that the administration’s budget is going to include something close to an overall freeze on domestic discretionary spending and a slowdown in the growth of military spending. But even if they are the only deficit reductions Congress considers this year, none of these changes will be easy to enact, making the individual appropriations bills extremely difficult to pass. Even the most zealous deficit reducers in Congress likely will be fighting like hurt animals to maintain favored programs.

As a result, it’s not hard to predict that one of the things appropriators hate the most — another omnibus bill — is likely to be in the offing.

It’s also not hard to see why being an appropriator this year won’t be that much fun.

Stan Collender is a partner at Qorvis Communications and founder of the blog Capital Gains and Games. He is also the author of “The Guide to the Federal Budget.—