Despite Debt Ceiling Deal, Future Budget Road Looks Bumpy

Although the recent debt ceiling deal theoretically brings Republicans and Democrats into agreement on spending levels for the next 10 years, the two parties remain miles apart on key budgetary issues. These fissures are likely to become apparent as Congress comes back into session and legislators begin work on a stop-gap continuing resolution over the coming weeks to stave off a government shutdown at the beginning of the next fiscal year, which starts Oct. 1.

The House passed six of the requisite 12 appropriations bills before the summer recess, a record for recent Congresses. But since coming back from break, there has been action in only one subcommittee. House appropriators seem to be waiting for an omnibus bill from the Senate, which would combine all the remaining legislation into one large budget bill.

By contrast, the Senate passed only one bill before the recess, but the Senate Appropriations Committee has passed three bills since and will be working on another six in the coming weeks. The debt ceiling deal set an overall spending level for FY 2012, and this seemed to get the Senate moving, as it had been unable to reach consensus on spending levels before the recess. Without a target number, the individual appropriations subcommittees were unwilling to hold public hearings or politically tough votes on their bills.

The debt ceiling deal set a spending cap slightly below the spending level for the current fiscal year ($1.050 trillion in FY 2011 vs. $1.043 trillion in FY 2012, a difference of less than a percentage point). As a result, the Senate is working with budget levels higher than the House levels, since the House budget slashed more than $30 billion from the budget.

Some conservatives are trying to rally support for the House to demand the lower levels in the House budget resolution, but House leadership is publicly supporting the budget levels set out in the debt ceiling deal.

A potentially bigger difference between the two houses is how the funding is allocated below the overall cap. The Senate holds defense spending flat from last year, while the House budget increased defense spending significantly. This means cuts to non-defense spending are much smaller in the Senate budget; by increasing defense spending by three percent, the House budget forces drastic cuts in other areas.

With many pro-defense conservatives already up in arms over the defense cuts in the debt ceiling deal, it is not clear that Republican members of the House will agree to the Senate’s proposal to keep defense spending flat (the debt ceiling deal caps “security” spending, which is defined as the Departments of Defense, Homeland Security, Veterans Affairs, and several other budget areas, meaning Congress could grow Pentagon spending at the cost of the other security programs while staying under the cap).

Even if the House agrees to the Senate’s general budget levels, there are multiple opportunities for the two parties to clash. Congress had been debating short-term extensions of both the surface transportation bill, which funds hundreds of billions of dollars worth of transportation projects over a five-year time period, and the reauthorization of the Federal Aviation Administration (FAA). Republicans have delayed both bills. They refused to reauthorize the FAA unless anti-union measures were attached and then demanded the transportation bill be cut by half. Over the weekend of Sept. 10-11, congressional leaders agreed to punt both issues into early 2012, temporarily defusing the situation. The weekend agreement also temporarily renews the gas tax, which pays for a great deal of the transportation bill; this delays a fight on that issue until 2012.

Perhaps the most contentious short-term fiscal issue before Congress is disaster relief. Thanks to a spate of costly natural disasters – an earthquake, Hurricane Irene, Tropical Storm Lee, and subsequent flooding, the Federal Emergency Management Agency (FEMA) is running out of funding, and the White House is seeking $5.1 billion in disaster aid for FY 2011 and FY 2012. While Republicans agree that more funding is needed to help rebuild communities across the country, House leaders are insisting that any new funds be offset by cuts elsewhere, outraging Democrats who accuse the GOP of essentially playing politics with natural disasters. House Appropriations Committee Chair Hal Rogers (R-KY) announced on Monday, Sept. 12 that disaster relief will be a part of the continuing resolution later in September, but he did not say how it would be integrated.

Of course, all of this is just a precursor to the premier budget fight to come, by way of the debt ceiling deal. The so-called Super Committee created by the deal is charged with releasing a massive $1.2 trillion deficit reduction package by Thanksgiving, and the committee may consider incorporating pieces of President Obama’s recently announced jobs bill into it (which would require deeper cuts to other programs). With a highly public fiscal fight looming in the future, Congress may decide to clear the decks by quietly wrapping up or postponing contentious issues in the FY 2012 budget.

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