The Long, Downhill Road to a 2011 Budget

Appropriations for fiscal year (FY) 2011 are now six months late. The fiscal year began on Oct. 1, 2010, but the nation is not much closer to having a budget than it was back then. As Congress comes face-to-face with the expiration of the current stop-gap spending bill, the budget's downward march may have stopped, but the possibility of a government shutdown still lingers.

The FY 2011 budget season began all the way back in February 2010 when President Obama released his yearly budget proposal. The big news then was that his budget included a three-year freeze, and although his proposal represented a $39 billion budget increase relative to FY 2010, some argued that increase was too small. The president's budget had a more lasting effect as a high-water mark. Since then, no politically feasible proposal has gone above the president's budget, and all have proposed at least some amount of cuts.

After the release of the president's budget proposal, all eyes turned to Congress, which, according to the law that sets the budget process, is supposed to pass a budget resolution in short order. This document establishes the upper boundaries of the year's budget and allocates funding levels to the appropriations subcommittees, which then create the yearly appropriations bills. A budget resolution is an integral part of the budget process and is supposed to be passed by both houses by April 15.

However, by March 2010, it was becoming clear that Congress would have a tough time passing a budget resolution. The main culprit was the House. The then-Democratic House had just finished the health care reform bill, and its more moderate members, particularly the Blue Dog faction, were watching their support wane back home. The last thing they wanted to do, according to press reports at the time, was vote through a "record breaking" budget with large deficits (thanks to inflation, every year usually sees a "record breaking" budget). Since Congress can vote through appropriations bills without a budget resolution, the House appeared inclined to not pass one.

The House's ambivalence echoed loudly in the Senate. That chamber reportedly refused to consider a budget resolution unless the House moved first. If the House would not pass a budget resolution, the thinking went, moderate Democratic senators would have no incentive to take a politically tough vote on a budget resolution containing a large deficit. Instead, holding individual votes on each of the twelve appropriations bills that make up the yearly budget seemed like a better alternative, since twelve votes on smaller bills would be easier than one big vote.

As a result, the Senate ended up passing a resolution only through its Budget Committee in April 2010. There was no floor action on the resolution. The House never even considered a resolution in committee and instead ended up passing a "budget enforcement resolution," a toothless, one-year budget resolution, in July 2010, which did not address long-term deficit issues. Both the House and the Senate resolutions contained cuts of around $7 billion, relative to the president's budget proposal. Overall, the resolutions would have resulted in an increase of about $30 billion compared to the FY 2010 budget.

With no budget resolution agreed to by Congress, uncertainty reigned on Capitol Hill. It was unclear how big of a budget Congress would be willing to consider. Into this void stepped two members of Congress: Rep. Pete Sessions (R-TX) and Sen. Claire McCaskill (D-MO). In March 2010, the two joined forces to create their own version of a budget resolution. Their proposal set top-line numbers for FYs 2011, 2012, and 2013, which were enforced by strict discretionary spending caps, and set very low limits for the amount of emergency spending in any given fiscal year. The Sessions-McCaskill proposal was $34 billion less than the president's request (representing a slight increase over FY 2010 levels), cuts far deeper than the ones the House and Senate were debating at the time, and groups like OMB Watch fought vociferously to make sure it did not become law. After contentious floor debate, the proposal narrowly failed in the Senate, losing by only a handful of votes.

With the demise of Sessions-McCaskill and the House and Senate reluctant to pass a budget resolution, Congress was left without a credible budget plan, and the entire process came to a standstill. Both houses worked sporadically on the appropriations bills but made little progress. By the close of the last fiscal year in September 2010, Congress had not passed any appropriations bills for this fiscal year, and there was no end to the process in sight. Instead, Congress resorted to passing a series of continuing resolutions (CRs) to fund the government at FY 2010 levels.

Everything changed in November 2010 with the election of a new Republican House. Republicans claimed they were elected with a mandate to cut spending and vowed to block any spending proposals that did not include drastic cuts. Earlier in the year, House Republicans had released a campaign manifesto, "A Pledge to America," which called for a return to pre-stimulus, pre-bailout budget levels and an immediate $100 billion cut in the FY 2011 budget. Even the previously controversial Sessions-McCaskill proposal was deemed insufficiently bold.

Despite the Republicans' rhetoric, Democrats still controlled both houses of Congress for another two months, leaving some hope that they could pass a FY 2011 budget in a lame-duck session. Democrats tried to rally support for an omnibus package, combining all twelve appropriations bills into one giant bill, but they failed to win over any Republicans. Any deal needed Republican support to clear the Senate, and Senate Republican leadership decided they would rather wait for the new Congress, when they would control the House and have a larger minority in the Senate, than finish the FY 2011 budget in 2010.

This decision would drag the budget process out another four months. In February, the new Republican House leaders previewed their budget plan for the rest of the fiscal year, which cut $35 billion from the president's original request. Senate Majority Leader Harry Reid ridiculed the number, calling it "unworkable." House freshmen balked at the plan, saying that the Pledge called for $100 billion in cuts and that the House Republicans needed to stick to their campaign promises. Facing a revolt from the rank and file, House leadership scrambled to find new cuts, and early on a Saturday morning, they released a revised budget plan, H.R. 1. Without holding any hearings on potential changes, the House bill would cut $100 billion from the president's FY 2011 budget proposal, representing a $61 billion cut from FY 2010, a level House leadership claimed met the promise contained in the Pledge.

H.R. 1 easily passed the House over strident Democratic opposition but met overwhelming opposition in the Senate. The Senate responded with a seven-month CR, crafted by Senate Appropriations Chair Daniel Inouye (D-HI). That CR contained far fewer cuts than H.R. 1 but continued the steady path downward from the president's budget request. Attempting to meet Republicans half-way between H.R. 1 and the president's request, Inouye's proposal cut $51 billion, a $12 billion decrease from FY 2010 levels. Despite this gesture, Inouye's proposal failed to pass the Senate, falling by an even larger margin that H.R. 1.

With both H.R. 1 and the Senate's seven-month CR dead, prospects for some kind of a compromise are slim. Congress has continued to pass short-term CRs, making significant cuts each time. As the clock keeps ticking, and with the fiscal year almost half-way over, House, Senate, and White House negotiators have continued meeting but have failed to produce a viable compromise. Recent reports are citing a growing consensus around roughly $33 billion in cuts from the FY 2010 budget, or $73 billion below the president's request, with Democrats unwilling to cut any more than that.

However, it remains to be seen if House conservatives will accept such a compromise. Representatives such as Mike Pence (R-IN) are now calling for a government shutdown unless Senate Democrats capitulate to his party's demands, saying any compromise below the level of cuts in H.R. 1 would be betraying the Pledge to America. With the current CR ending on April 8 and some members of Congress vowing to vote against any more CRs, a government shutdown is a stark possibility.

The president met with congressional leaders today (April 5) to try to work out a deal. Even as the president convened the budget meeting, Boehner instructed his House colleagues to prepare for a government shutdown. The meeting concluded without a deal in place, but the situation remains fluid as of press time. Check OMB Watch's blog, The Fine Print, for late-breaking updates on the FY 2011 budget negotiations.

FY 2011 Budget Proposals (in billions)
Proposal Total Amount Difference from
Obama FY 2011 Request
Difference from
FY 2010 Enacted
FY 2010 Enacted $1,090 -$39 $0
Obama FY 2011 Request, Feb. 2010 $1,128 $0 +$39
Sessions-McCaskill, March 2010 $1,094 -$34 +$4
House Budget Enforcement Resolution, July 2010 $1,121 -$7 +$31
Senate Budget Resolution, April 2010 $1,122 -$6 +$32
House H.R. 1, Feb. 2011 $1,029 -$100 -$61
Senate Seven-Month CR, March 2011 $1,077 -$51 -$12


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