Budget Resolution Update

As of June 1, there is still no budget resolution, even as the appropriations process is scheduled to begin.

The House narrowly passed the FY 2005 budget resolution conference report on May 19. In spite of wishful thinking that sheer momentum would ensure Senate passage, a vote in the Senate was postponed to avoid an embarrassing defeat. Four Republicans -- Senators McCain (AZ), Collins (ME), Snowe (ME), and Chafee (RI) -- continue to hold out against passing a budget that privileges tax cuts over everything else by requiring pay-as-you-go ("PayGo") for spending, but not for tax cuts. While a deal may still be reached, it is possible and even likely that there will be no resolution this year. This would be the first time that a single-party House and Senate failed to pass a budget

While the budget resolution is non-binding, it does set broad spending and tax policies and establishes budget process rules. During the past few years, it has been used to make it easier to pass tax cuts, through the "reconciliation" process. Without a budget resolution, certain tax cuts will not be protected and, like other legislation, will require 60 votes to pass in the Senate, rather than a simple majority. In the current climate where the President and congressional majority are determined to make expiring tax cuts permanent, as well as pass even more unbalanced tax changes, the lack of a budget resolution may be a blessing.

Nevertheless, it is very likely that the extension of the so-called "middle-class" tax cuts that expire in 2005 (marriage "penalty," the 10 percent tax bracket, and expansion of the child tax credit) will garner the 60 votes needed in the Senate. However, the question of offsetting the cost may, and should, arise. These "middle-class" tax cuts could be paid for by rolling back some of the many tax breaks for the super-wealthy or closing tax loopholes so that corporations and billionaires would pay their fair share. Over 60% of corporations don⦡mp;#8364;?t pay any federal tax ⦡mp;#8364;“- and at a time when corporate profits are reaching record highs, Congress should be able to offset the costs and to keep from digging a bigger deficit hole.

Fixing the Alternative Minimum Tax (AMT) is another tax cut that is considered a "must-pass." The House has already passed those four tax cuts bills over the past few weeks, with no offsets, at a cost of a half trillion dollars over the next ten years. The Senate will likely consider this matter soon as well.

The House is also planning to take up a stand-alone bill to make changes to the budget process. Again, this is primarily designed to make tax cuts easier to pass and to reduce spending. This effort to radically shrink the government by slashing government revenue will continue to threaten big cuts in the government services and initiatives upon which all Americans depend.

With or without a budget resolution, America cannot afford costly tax cuts now, and their accelerating costs over the next few decades would prove disastrous.

What are some of the other implications of Congress' failure to pass a budget resolution?

  • With the vehicle of the budget resolution into which a provision increasing the debt ceiling could be quietly inserted, the House will still be faced with finding a way to raise the ceiling sometime this summer. Without this increase, the U.S. Government would go into default -- an untenable scenario. Yet this measure may be included in the bill approving the $25 billion request for supplemental funding for Iraq, making a "nay" vote look like a vote against supporting the troops, or in some other legislation. This would avoid the election-year impact of public attention to the fact that the policies of this Congress and Administration have created a structural deficit that increases the national debt by the hour.
  • Appropriations will be enormously complicated, but this is primarily because the "302(b)" limits that divide up the total discretionary appropriations amount into the 13 appropriations bills will be impossibly low. Increases in military spending, homeland security, and other specific programs will mean that funding for other domestic spending will be severely squeezed. By passing the budget resolution, the House "deemed" the $821.4 billion in total discretionary spending as the final level, allowing the Appropriations Committee to begin working on the spending bills, even if the Senate does not pass the resolution. In fact, the House Appropriations Committee has signaled its intent to move forward with three subcommittee markups during the week of May 31. However, some experts think that the end result may be a long-term continuing resolution (CR) funding government at last year's levels until, at least, after the election.

Congress returns this week. We can expect a long and contentious budget season ahead.

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