Think of the debate about federal spending as a three-act play in which all three acts are being performed on the same stage simultaneously. Congress must not only adopt a budget for 2011 and 2012, but also address how much the federal government can borrow. Oh, yes, it also must tackle debt reduction initiatives that address Social Security and Medicare. Here’s a closer look at what’s in play.
The 2011 budget will govern how much the government can spend between now and Sept. 30.
Congress should have passed a budget for this year no later than last September. Because it didn’t, the government has operated under a series of short-term “continuing resolutions” that authorize departments to continue spending at last year’s levels. The latest continuing resolution expires at 12:01 a.m. Saturday; if both houses can’t agree on a 2011 budget or a new continuing resolution by then, all “nonessential” government functions will shut down.
The debate centers on three ideas:
The president’s 2011 budget
Bottom line: $3.8 trillion
Key features: Would have cut or eliminated some domestic programs as well as big-ticket military equipment, and it proposed big increases for education and civilian research. Wealthy Americans, big banks, and oil and gas companies would have paid more in taxes, but the middle-class and small businesses would have gotten additional tax cuts worth hundreds of billions of dollars.
Status: Presented more than a year ago, it's ancient history. The tax provisions were largely superseded by legislation extending all Bush-era tax cuts.
The House of Representatives’ 2011 budget
Bottom line: Passed on Feb. 19, it includes $1.2 trillion for the rest of the fiscal year, which ends Sept. 30
Key features: It fulfilled the promise many members made to tea party groups to roll back spending to pre-2008 levels. It would make spending reductions in nearly every area of government, including domestic programs, foreign aid and some military projects. It would also eliminate funding for certain programs, such as Planned Parenthood.
Status: GOP members with tea party ties are using it as leverage to force party leaders — who are nervous about a possible shutdown — to play hardball with Democrats.
‘Compromise’ budget under negotiation
Bottom line: In dispute. Senate Majority Leader Harry Reid, D-Nev., says the GOP agreed to a target of $33 billion in cuts from 2010 spending levels, a target he says Democrats have met. House Majority Leader John Boehner, R-Ohio, rejects those claims, saying $61 billion is still the GOP's goal (but suggesting that he might settle for $40 billion.)
Key features: Details have been scarce as the negotiations take place behind closed doors.
Status: Negotiations continue.
There is much more at play than just the 2011 budget. For example:
Raising the debt ceiling
Congress sets a limit on how much money the government can borrow. By mid-May, we’ll reach that limit, now $14.3 trillion. The administration argues that failing to raise it could trigger global repercussions similar to the European debt crises. Tea party adherents oppose raising the limit unless in return for deeper spending cuts.
Long-term debt reduction
Some ideas on reducing the debt come from Bipartisan Policy Center and the president’s debt commission.
Bipartisan Policy Center
Bottom line: It would stabilize the debt at less than 60 percent of gross domestic product and balance the budget, excluding interest payments, by 2014.
How: It would end most tax deductions and lower tax rates; increase the amount of wages taxable for Social Security; phase out the deduction for employer-provided health care; and freeze domestic discretionary spending for four years and defense spending for five.
President’s debt commission
Bottom line: It would cut $4 trillion in deficits over the next 10 years
How: It proposes nearly $200 billion in domestic and defense spending cuts in 2015; it would lower income tax rates, simplify the tax code, and raise the gas tax; it would reduce Social Security for wealthier retirees and raise the Social Security retirement age to 69 by 2075.
The 2012 budget
Congress has already begun debating the 2012 budget, which will take effect Oct. 1. There are two proposals.
The president’s 2012 proposed budget: It calls for a five-year freeze on discretionary spending, excluding national security, to help curb deficits. It also relies on tax increases, including a cap on itemized deductions for wealthier taxpayers, to stem red ink.
House GOP’s 2012 budget: Offered by Rep. Paul Ryan, R-Wis., it would fundamentally restructure Medicare. People under the age of 55 would get a set amount to use toward the purchase of private health insurance, rather than having the federal program pay directly for their care. Medicaid, too, would change, becoming a lump-sum grant to states. It also calls for reducing the federal deficit by $4.4 trillion over the next decade.
Victoria Loe Hicks vhicks@ajc.com
