PRESS STATEMENT
-For Immediate Release-
April 22, 2008

Contact: Brian Gumm, (202) 683-4812, bgumm@ombwatch.org

OMB Watch Statement
Compromise Efforts on FY 2009 Budget Resolution

WASHINGTON, April 22, 2008—Two major challenges face a congressional conference committee this week as it enters a critical period in forging a compromise out of the House and Senate FY 2009 budget resolutions adopted in March. The conference committee will need to address some of the glaring inadequacies and misplaced priorities in funding for domestic investments in both the House and Senate resolutions. It will also need to reconcile two significant differences between these versions if a final resolution for FY 2009 is to pass Congress.

Close to 100 important domestic investments have seen cuts in funding over the last four years in real terms — that is, after accounting for inflation. Some of the results of these cuts:

• In the past year, 62 percent of Head Start programs have had to cut back on hours of service or other aspects of their operations
• 150,000 rental housing vouchers were lost
• 100,000 fewer children received child care assistance in FY 2008 than the year before
• An estimated 169,000 fewer workers received job-related training
• 1.2 million households suffered gas or electricity shut-offs last spring

These funding inadequacies and misplaced priorities become shameful, if continued, especially when seen against the backdrop of the currently deteriorating economy. Congress should address the consequences of current conditions in considering a budget resolution compromise. But the domestic discretionary spending caps in the House and Senate resolutions barely keep pace with inflation — far below levels needed this year to help restore economic growth and opportunity for all Americans. While the small amount of additional funds in the House and Senate versions are an improvement over President Bush's budget proposal, these levels should be significantly increased in the compromise version currently being developed.

There are two other major issues that need to be resolved before Congress can consider a final resolution. First, the House version includes an instruction to pay for an extension of the Alternative Minimum Tax (AMT) "patch," which holds constant the number of taxpayers liable to the AMT. Without such a patch, nearly 25 million more Americans will be subject to the AMT and will see their taxes rise by an average of $4,000 next year, according to the Tax Policy Center. The FY 2009 patch, which all agree is imperative, will cost $70 billion this year and upwards of $100 billion over the next ten years if it is deficit-financed. The House instruction to ensure the patch is paid for — thus making it compliant with Congress's pay-as-you-go (PAYGO) budget discipline rules — belongs in the final version of the budget resolution; if the offset is not there, the AMT patch will add over 20 percent to the estimated federal deficit in FY 2009.

Second, the Senate budget resolution includes a $35 billion reserve fund to provide an economic stimulus initiative. Such stimulus funding could be used to provide urgent relief for many struggling Americans. Economists on the left and right agree increasing food stamps and unemployment insurance provides some of the most effective stimulus tools by quickly distributing needed benefits right back into the economy. Congress should also aid some of the 20,000 households per week that are losing their homes to foreclosure and increase emergency food and child nutrition assistance. Other policy options that are worthy of consideration as part of the $35 billion fund include helping with utility bills, state fiscal relief, and support for infrastructure projects like bridge repair and road maintenance.

Whatever specific policy options Congress ultimately settles on, the stimulus package outlined in the Senate version of the budget resolution — just like the AMT fix — should be constructed so it is PAYGO-compliant and included in the final resolution. Finding a compromise for these two aspects of the budget resolution in a fiscally responsible way will provide more of what is most needed to strengthen the economy at a time of rapidly growing unemployment, stagnant wages, increasing income disparity, and rapidly rising debt.

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