‘Perils of Pauline’ Budgeting Comes to D.C.

Posted April 11, 2011 at 6:08pm

The continuing resolution debate that took the federal government to the brink of a shutdown Saturday was as close to a classic “Perils of Pauline” silent movie ending as you can get. Once the common political wisdom changed from the continuing resolution being the most important budget fight of the year to it being just the opening act, the budget was untied and taken off the railroad track just as the train was about to run over it.

While everyone from federal employees to D.C. residents with trash to be collected may have breathed a big sigh of relief, it’s important to know that this latest episode in “The Perils of the Federal Budget” will not be the only one this year with a cliffhanger ending. Each one of the next steps is just as likely to be decided only after the federal fiscal version of a dastardly deed is threatened and is on the verge of happening.

The fiscal 2012 budget resolution is next. Budget resolutions are symbolically important because they set out the plan for spending and revenues that Congress supposedly will follow for the rest of the session.

But budget resolutions don’t actually cut spending or increase revenues. The Congressional Budget Act, which created budget resolutions, was enacted in 1974 under a deal that protected the power of the committees with jurisdiction over spending and revenues from the soon-to-be-established House and Senate Budget committees. The agreement, which made a great deal of political sense at the time but is likely to be infuriating to many inside and outside Washington now, was that the Budget committees would draft a budget resolution that set the totals for spending and revenues, and the authorization and appropriations committees would come up with the legislation that recommended how the actual changes would be made.

The House plans to begin debate this week on a Republican-authored fiscal 2012 budget resolution, and adoption may be relatively simple to achieve because the vote won’t actually change anything. It will be the first opportunity for House Republicans to go on record in favor of the bigger changes they say they want in spending and revenues. 

But the actual spending and revenue policies assumed in the resolution won’t be guaranteed by adoption of the budget resolution. Assuming it is adopted, the budget resolution will likely include reconciliation instructions to the committees with jurisdiction over the changes assumed. However, reconciliation only occurs if there’s a budget resolution conference report, and that will require the Republican majority in the House and the Democratic majority in the Senate to compromise on what are likely to be overwhelming differences over spending and revenues.

Timing will then become a huge problem. The Treasury Department is projecting that the current federal debt ceiling will be reached around June 1, and the House GOP has vowed not to increase the government’s borrowing limit until a plan for significant spending cuts is in place. That plan is most likely to be embodied in a reconciliation bill, but that is unlikely to be finalized by the time the debt ceiling is reached either because the House and Senate will not have agreed on a budget resolution or because the two chambers will not have agreed on how the reconciliation changes assumed in the budget resolution should be achieved.

Treasury Secretary Timothy Geithner has indicated that the government will only have a maximum of about two months once the debt limit is reached before its inability to borrow will have severe repercussions. Even if, as I believe, the government has cash management techniques available to it that would extend the day of reckoning beyond what Geithner says, the pressure to at least reach a budget resolution conference report or a compromise on reconciliation could be as intense in August or early September as the drama to avoid a shutdown was Friday. 

Based on this timing, the controversies over the budget resolution, reconciliation and debt ceiling could all come together about a month before fiscal 2012 will begin. At that point, the appropriations for the coming year and the debt ceiling could both be held hostage to a demand for a reconciliation bill. 

That will mean that, unless there’s an agreement between the House and Senate that at the moment doesn’t seem obvious, the pressure is likely to build through the rest of this year until last week’s appropriations fight is replayed and another shutdown becomes a possibility. There will be one big difference, however. The budget could be strapped to a nuclear bomb in that battle, instead of being tied to the tracks.

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.”