Congress Once Again Punts on FY 2011 Budget

by Sam Rosen-Amy, 12/23/2010

Surprising almost no one, on Tuesday Congress passed a short-term continuing resolution (CR), funding government for another few months and delaying passing a budget for the 2011 fiscal year. Over the past week or two, it became obvious that Democrats did not have enough votes to pass a year-long budget of some kind, either as a CR or as an omnibus. Republicans blocked any effort to pass a long-term spending bill, instead lobbying for a short-term CR, which in this case will last until March 4, 2011. With the budget delayed until next year, Republicans will theoretically have more of an influence over it, since they will have more power in the next Congress.

While it is common for federal budgets to be completed after the start of the fiscal year, it’s somewhat less common for budgets to take this long.According to THOMAS, the Library of Congress’ bill tracking site, Congress was unable to complete a federal budget on time in any of the last fourteen fiscal years (including FY 2011). Only one of those budgets, however, took until March to be finished.

As I mentioned in my last post, a short-term CR is pretty much the worst option available to Congress. The CR essentially funds government at FY 2010 levels, with a few minor additions and subtractions. Delaying a final FY 2011 budget for the federal government and continuing funding at last year's level makes it harder for agencies to do their job. Agencies can’t create new offices, and it’s difficult to start new initiatives without a guarantee they’ll be fully funded. The New York Times has a great article yesterday on just how hard temporary funding makes governing, giving the following examples of how the budget fight is affecting agencies:

The Securities and Exchange Commission has stopped hiring and halted most travel by agency officials.

Hundreds of millions of dollars in aid to nations like Pakistan is held up, as are American contributions to global health and emergency food programs.

A systems upgrade by the Internal Revenue Service to improve electronic data-keeping and speed tax refunds could be delayed for years - all because the federal government is operating on a temporary measure largely at last year’s levels.

The article goes on to note that it’s also negatively impacting states and local governments. While federal agencies can shift money around a little bit, changing budgets at the margins to address shifting priorities, it can be harder for cash-strapped states and localities, which often rely on federal funding.

The Times article also talks about how the short-term CR Congress passed doesn’t include funding for either the new health care law or the financial reform bill. While this isn’t a good thing, it certainly isn’t new. Financial regulators have been chronically understaffed and underfunded, which is part of the reason why we had a financial crisis in the first place. But the fact that the Securities and Exchange Commission is delaying implementing certain parts of the reform isn’t the end of the world; the reforms are still being implemented, they’re just being done by existing staff, not new offices. So all this talk of Republicans undoing Obama’s legislative victories through funding cuts is a bit overblown. It’s just another example of Congress not spending enough on the federal workforce, a trend that’s been going on for a while (and which the CR further perpetuates by including a two-year federal civilian employee pay freeze).

While Republicans fought to push the FY 2011 budget debate into the next Congress, it isn't clear what effect they will actually have. Despite recent calls for a return to FY 2008 levels, which would entail drastic cuts across the board, for most of the past two years, Republicans have been calling for spending cuts without offering any meaningful suggestions. The only step they’ve taken so far has been to swear-off earmarks, which only account for less than one percent of the federal budget, making it more of a gimmick than serious policy. Next year’s budget negotiations will force Republicans to backup their tough talk. Will they fight for unpopular spending cuts, or will they take the easy out and push for more deficit-financed tax cuts instead?

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