BUDGET DEAL STRUCK...NOW THE HARD PART

May 5, 2005

Just before leaving town for a one-week recess the Senate ratified a five-year, $14 trillion budget plan that the House had approved a few hours earlier.  The plan, called a budget resolution, sets overall spending and revenue targets which, among other things, call for reductions in entitlement programs and a new round of tax cuts.

After some contentious debate over the past several weeks, House and Senate negotiators managed to strike a deal that shaves nearly $35 billion from entitlement spending through 2010, with nearly a third of that—$10 billion—presumably coming from the Medicaid program.  "Presumably" because while the budget resolution sets hard and fast spending limits, the responsibility for determining exactly how those limits are achieved is left to other congressional committees to decide.

The budget blueprint also clears the way for $106 billion in tax cuts over the next five years, including the extension of tax cuts that would otherwise expire like the cut in capital gains enacted in 2003.

While the overriding goal of passing a budget resolution—once again, presumably—was to bring the federal deficit under control, the results are not what they seem.  In fact, the federal deficit would be lower next year without the spending and tax changes included in the budget resolution.  Moreover, it would be lower every year through 2010 if the budget resolution had not been passed.  The deficit increases Congress approved in the budget resolution means $85 billion more red ink next year, and $168 billion more for 2006 through 2010. 

Be that as it may, now the task falls to the individual committees of Congress to determine how best to arrive at the savings called for in the resolution.  For Medicare and Medicaid, responsibility rests with the House Ways & Means Committee, the House Energy & Commerce Committee and the Senate Finance Committee. 

On the discretionary side of the budget—that portion over which Congress has the most control—the budget resolution imposes a bottom-line spending freeze of $404 billion on non-defense programs.  Here, the responsibility falls to the Appropriations committees to begin making line-by-line decisions about spending for public health, medical research, education and other domestic programs.  That process begins in the House appropriations committee, where its chairman, Rep. Jerry Lewis (R-California) has indicated that he will work to bring all of the annual appropriations bills in under budget. 

Lewis has set out a work plan that would begin sending spending bills to the House floor as early as mid-May, probably beginning with the Interior and Homeland Security appropriations bills.  Subcommittee mark-up of the Labor-HHS-Education bill is tentatively set for June 8, with floor action the week of June 20.  Lewis's plan is to have at least 11 appropriations bills passed in the House by July 4, in an attempt to avoid another omnibus "pile-up" at the end of the year.  But that assumes the Senate will act quickly as well—not a safe assumption, given threats of a meltdown over possible changes to the filibuster rules.