A SHIFTING BUDGET AGENDA

September 8, 2005

As lawmakers return from their summer recess, they face a legislative agenda that's considerably different than the one they left behind five weeks ago—an agenda that could markedly affect how this year's budget process plays out.

The war in Iraq has grown increasingly unpopular, gas prices have skyrocketed and the toll taken by Hurricane Katrina will have to be addressed.  Further complicating the situation is the fact that, with the start of the new fiscal year less than a month away, most of the major budget decisions of the year have yet to be made.

Two weeks before Congress left for its August recess, the Office of Management and Budget issued its mid-session review, projecting that the fiscal year 2005 deficit would be $334 billion, instead of the $427 billion the president projected in February—still not great, but at least a move in the right direction.  But the devastation inflicted by Hurricane Katrina is certain to change that direction again.   

A New Budget Paradigm

Only days after passing an emergency $10.5 billion disaster relief appropriation, President Bush announced that another $52 billion in aid will be needed, sooner rather than later.  But lawmakers are predicting that far more will be required to meet both human and infrastructure needs.  So in all likelihood, Congress will pass another emergency supplemental by mid-September, with at least two more emergency spending bills slated before year's end. 

How will that affect an already-strained budget? 

As of early September, Congress had passed only two of the annual appropriations bills necessary to keep the government operating in the new fiscal year that begins October 1.  Even before Katrina's devastation, the stage was already set for serious belt-tightening when it came to health, education and other non-security programs.  Additionally, lawmakers planned to use this month to debate the details of a planned $35 billion cut in entitlement programs. 

In order to continue the flow of money and services to states affected by Hurricane Katrina, lawmakers will simply declare an emergency.  By doing so, technically, Congress avoids breaching the spending limits imposed by the budget resolution it passed in late spring.  But new spending, regardless of how it's defined, ultimately affects the bottom-line deficit total, which is prompting lawmakers on both sides of the aisle to question whether some drastic changes are in order.

Earmark Practice Under Review

After Congress adopted a budget resolution earlier this year that severely limits discretionary spending, appropriators were already planning to hold the line on the number and size of earmarked projects.  But with the added pressure to fund hurricane relief efforts, some lawmakers on both sides of the aisle are suggesting the practice of earmarking be suspended or cut back for the time being.  Some say the government simply cannot afford to fund both disaster relief and local congressional projects.  Others are concerned about the public perception—that Congress would divert funds for "lesser priorities" rather than plow as much as possible into rebuilding the Gulf Coast region.

With Congress now planning to be in session until Thanksgiving, the issue of earmark funding won't be resolved until the very end of the congressional session.