September 18, 2007

Senate Continues Defense Authorization Debate
Conrad, Gregg to Propose Entitlement Commission
Baucus Releases Farm Tax Package
Finance Committee Reports Debt Ceiling Increase 

BUDGET PROCESS STEP-BY-STEP™

This Week:

This morning (Tuesday 9/18), the House Ways and Means Committee approved an aviation fuel tax hike as part of this year's FAA Authorization. (JCT Revenue Estimate)

Yesterday (Monday 9/17), the Senate began Floor consideration of the FY 2008 Defense Authorization bill (H.R. 1585). (Senate Floor action on the defense appropriations bill (H.R. 3222) is possible next week.)

Context: While most authorizing bills focus broadly on program goals and operations, leaving specific line-item funding decisions to the appropriations bill, the annual defense authorization bill typically seeks to impact funding on line-items throughout the defense budget. This often results in a complicated interaction between the authorization bill and the appropriations bill.

The defense budget is further complicated this year because Congress will consider the President's request for operations in Iraq and Afghanistan in a separate war funding bill in October . Reportedly the President's '08 war funding request will be significantly higher than the $145 billion initially requested in February. For an overview of key issues in the FY 2008 defense authorization and appropriations bills, see the following Aug. 30 CRS report:Defense: FY 2008 Authorization and Appropriations

Next Week:

Consideration of Continuing Resolution [Context: Congress must send the President a Continuing Resolution (stopgap spending measure) to keep agencies operating when spending authority expires on October 1. Few, if any, of the 12 regular appropriations bills are likely to be enacted by October 1; the President has stated his intention to veto 9 of the 12 FY 2008 Appropriations bills.]

Senate consideration of DOD Appropriations (if action on DOD Authorization is completed)

Passage of SCHIP conference report House and Senate negotiators are nearing an agreement. However, the likely agreement would follow the Senate bill's expansion of the program by $35 billion over 5 years, which has drawn an Administration veto threat.

Sunday 9/30: SCHIP (children's health insurance) and “Farm Bill” authorizations expire

Monday 10/1: Fiscal Year 2008 Begins (CR must be signed into law in order to avoid agency shutdowns)

CONRAD, GREGG TO PROPOSE ENTITLEMENT COMMISSION

Budget Committee Chairman Kent Conrad (D-ND) and Senator Judd Gregg (R-NH) will hold a press conference today to unveil their joint legislation creating a bipartisan task force to address the nation's long-term fiscal imbalance.

[From January 31, 2007 WBR : Federal policymakers will soon face the budgetary realities accompanying the impending baby-boomer retirement (which begins sometime between next year and 2010 depending on who is defining the “boomer generation”). Retirement of the boomers will mean: (1) surging Social Security outlays and (2) surging Medicare outlays. Watch for bipartisan efforts to create a Social Security or Entitlement Commission (similar to the Greenspan-Moynihan-Dole Commission of the early 1980s).]

SENATE APPROVES TRANSPORTATION-HUD

On September 12, the Senate passed H.R. 3074 the FY 2008 Transportation-HUD Appropriations bill by a vote of 88-7 . The measure would appropriate $104.7 billion, of which, $51.1 billion is discretionary spending ($3.1 billion above the President's request and a 7.4% increase over FY 2007). [Context: The remainder of the funds are mandatory spending appropriated to reimburse States for highway and bridge projects, previously authorized by the SAFETEA-LU Highway Bill.]

As House and Senate negotiators go to conference on the bill, they face Administration veto threats on both the House- and Senate-passed bills. (Although the Senate bill passed with a veto-proof majority, the House vote fell short of the two-thirds supermajority needed for a veto override.)

Most of the funding in excess of the President's request is for housing and community development programs.

Key votes on the Senate Floor included a Murray amendment providing an additional $1 billion in grants to states for bridge repairs in the wake of the August 1st bridge collapse in Minnesota .

Senate Committee Release
House Committee Release
Statement of Administration Policy (Senate Bill)
Statement of Administration Policy (House Bill)
Murray Statement

SENATE APPROPRIATORS APPROVE DEFENSE BILL

On September 12, the Senate Appropriations Committee approved its version of the FY 2008 Defense Appropriations bill (H.R. 3222). The measure would provide $459.3 billion in discretionary spending (excluding war spending), which is $3.8 billion less than the President requested but an overall increase of $39.4 billion over FY 2007.

Senate Committee Release 

FINANCE CHAIRMAN BAUCUS RELEASES FARM BILL PROPOSALS

Last week (September 11), Senate Finance Committee Chairman Max Baucus (D-MT) released a tax package including $8 billion to $10 billion in tax proposals for the Farm Bill. The agricultural tax package would create a permanent disaster relief fund for farmers, new rural development bonds, and would convert conservation payments into tax credits. The proposal did not specify how the package would be funded. Agriculture Committee Chairman Harkin released a statement welcoming the proposals but cautioning that there is still “a way to go in these discussions.”

[Context: The "Farm Bill," renewed every 5 to 6 years, governs the key aspects of Federal farm policy. Many provisions of the current Farm Bill, enacted in 2002, will expire this year. The 2002 bill covers a wide range of programs. Those with the greatest budget impact are (1) Food Stamps; (2) Commodity Support programs (government subsidies to producers of certain farm commodities--primarily corn, cotton, wheat, rice, and soybeans--intended to stabilize farm income); (3) Agricultural Conservation programs (payments and incentives addressing environmental concerns, soil erosion and water supplies);and (4) Export Programs. See last week's WBR for additional background.]

FINANCE REPORTS DEBT CEILING INCREASE

Last week (September 12), the Senate Finance Committee voted to report H.J.Res. 43, legislation to increase the nation's debt ceiling from $8.965 trillion to $9.815 trillion. In a July 30 letter, Treasury Secretary Paulson informed Congress that the current debt ceiling would be reached in October. Passage of the debt ceiling is a financial imperative in order to honor the Federal government's financial obligations.

While ultimate passage of the debt ceiling increase is never in doubt, it often attracts heated debate on the Senate Floor regarding Federal fiscal policy. With a major election coming next year, there is no doubt that Senators will spend considerable time “debating” this measure. (The House long ago decided to spare itself from the periodic political storms over the debt ceiling by adopting the “Gephardt Rule,” under which the House is “deemed” to have passed a debt ceiling increase by virtue of voting on a Budget Resolution that recommends such an increase.)

In addition to attracting heated debate, the debt ceiling often attracts a slew of amendments because it is a “must pass” bill. In previous years, debt ceiling bills have often been the vehicle for major budget legislation.

[Context: Federal debt is the accumulated debt of the Federal government. Whenever the Federal government runs an annual budget deficit, the additional borrowing to finance that deficit adds to the Federal debt. Federal law contains a statutory limit on the Federal debt, commonly called the “debt ceiling.” The debt ceiling approximates Gross Federal debt —which includes: (1) Debt Held by the Public (money borrowed by selling Treasury securities in the capital markets to various buyers including foreign investors, mutual funds, state and local governments, commercial banks, insurance companies and individuals); and (2) debt held by Federal government accounts , such as the Social Security Trust Funds and various federal retirement trust funds. (The Social Security and other trust funds, by law, invest all of their surpluses in nonmarketable Treasury securities.)

While a lot of political attention is paid to the debt ceiling, many economists view Debt Held by the Public as more significant economically than Gross Federal Debt, because Debt Held by the Public reflects the total amount the Federal government is borrowing from the private credit markets—with the implications that has for interest rates and available credit.]

NEW BUDGET DOCS

US Treasury: Revised Monthly Treasury Statement (August 2007)

CBO: Replacing and Repairing Equipment Used in Iraq and Afghanistan : The Army's Reset Program