Before the dust has even had a chance to settle on FY2011, Congress and the President have already begun work on the budget for FY2012 – a process that promises to be just as full of politics and policy debate as FY2011 has been. As we’ve blogged, House Budget Chairman Ryan has moved the FY2012 budget battle forward by introducing a House Budget Resolution, which the House passed last week by a vote of 235-193, largely along party lines. In the regular order of business, the Senate Budget Committee— committee would develop their own resolution, which would then be passed by the Senate, at which point the two chambers’ versions would be reconciled. However, this is not shaking out to be a normal year and we’re seeing a number of players emerging as influencers and agenda-setters over the budget – namely, the Gang of Six and a newly created fiscal commission, both of which will are discussed below. The President has also taken a more central role in the process by putting a new deficit plan forward.
So, why is FY2012 already contentious, who are all these new players, and what kind of timeline can we expect?
First, the “Why.” A hundred new members of Congress were elected last year on a platform to cut spending and reduce the national deficit. In addition, the U.S. Department of Treasury is projecting that the United States will reach its debt ceiling sometime between May 16 and July 8th. In order to keep the government operational and to ensure we don’t default on loans from foreign countries, Congress will have to take action to raise the debt limit – ideally, well before the date the government hits the current ceiling. This has led some fiscally conservative Members of Congress to say that they will vote to raise the debt ceiling IF and ONLY IF Congress also commits to significant deficit reduction, such as caps on spending or other proposals. If deficit reduction is tied to the debt limit vote, this would mean Congress and the White House would need to discuss, negotiate, and agree on ways to reduce the deficit by trillions of dollars, and they would need to do this very, very quickly. Conversely, though, many in Congress on the Democratic side are calling for a “clean” vote on the debt ceiling that is not tied to any other issue.
Now, the “Who.”
The President introduced his FY2012 budget in February, and in an unconventional move, made a speech just last week to lay out a deficit reduction proposal of his own for next year. Information on the President’s proposal can be found here – the provision we’re watching the most closely is how he proposes to achieve $100 billion in savings from Medicaid through a retooling of the federal matching rate for Medicaid and CHIP. We will keep you updated with more details on the specifics of this proposal as they emerge, but the President also committed to protecting the Medicaid and Medicare programs.
The Gang of Six is a bipartisan group of six Senators who have been meeting for the last few months to negotiate ways of bringing the deficit down. The group includes Dick Durbin (D-IL), Mark Warner (D-VA), Kent Conrad (D-ND), Saxby Chambliss (R-GA), Tom Coburn (R-OK), and Mike Crapo (R-ID). These six Senators have announced their commitment to enacting a meaningful and balanced deficit reduction plan this year and recently announced they intend to introduce their proposal within the month.
The President’s New Congressional Advisory Panel would be a group of 16 lawmakers chosen by congressional leaders from both parties and overseen by Vice President Biden. This is different from the bipartisan fiscal commission President Obama called together last year. The President announced his intention to create this new panel in his speech last week but not all members of the new panel have been named yet. The group would be charged with coming up with a bipartisan agreement within about a month’s time.
Finally, the “When.” The Treasury’s projection about the debt limit puts a finite deadline on how long Congress will have before it must act – namely July at the very latest. That being said, the debate leading up to the debt limit vote will be twofold: 1. whether there will need to be a deficit reduction plan attached to it in order for the debt limit to pass; and 2. if there is such a plan, what will it look like. The House has already passed its budget resolution (introduced by Chairman Ryan), so the action moves to the Senate next. Given the potential time constraints and the progress so far, many will look to the proposal from the Gang of Six in the Senate expected to be released very soon – probably within the next month. Finally, the President’s bipartisan panel of negotiators may get started very soon given his proposed timeline, provided Congressional Republicans appoint representatives, which they have not agreed to do yet. Here at NACHC we’ll be following FY2012 closely, so stay tuned to the blog for updates on the process, politics, and policies of the next fiscal year.