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House of Representatives
Budget Resolution for FY2013
On March 23 Chairman of the House Budget Committee, Paul Ryan (R-WI) introduced
H. Con. Res. 112
CONCURRENT RESOLUTION
ON THE BUDGET--
FISCAL YEAR 2013
On March 23 House Budget Committee reported the
measure to the full House on a vote of 19-18.
Two Republicans on the Budget Committee voted
not, Huelskamp and Amash, because the
resolution did not go far enough in cutting
spending.
On March 29 the Full House Passed
H. Con. Res 112 by a vote of
228 to 191
What policy recommendations are contained in
H. Con. Res. 112?
How do these recommendations fit into the Budget Control Act and what the President
recommended in February?
Sets a FY 2013 discretionary budget cap
lower than the one set by the Budget Control Act
H. Con. Res. 112House Concurrent Budget Resolution for FY2013
Cancels the January 2013, BCA-mandated sequester of discretionary
and mandatory spending in order to shield defense spending from cuts.
H. Con. Res. 112House Concurrent Budget Resolution for FY2013
Sequestration is replaced with cuts to non-defense discretionary and
mandatory spending (which would be accomplished through budget
reconciliation).
H. Con. Res. 112House Concurrent Budget Resolution for FY2013
Calls for reforming state grant programs, with Medicaid and the
Supplemental Nutrition Assistance Program (SNAP) specifically identified
for possible conversion to block grants.
H. Con. Res. 112House Concurrent Budget Resolution for FY2013
It also calls for a deficit-neutral overhaul of the tax code, with two personal income
tax rates replacing the current structure and the repeal of unspecified tax
preferences.
It also would reduce the top corporate tax rate.
H. Con. Res. 112House Concurrent Budget Resolution for FY2013
April 3, President Obama characterized
the Ryan budget as
“Social Darwinism” .
The survival of the fittest basically at the expense of others.
H. Con. Res. 112House Concurrent Budget Resolution for FY2013
Behind the NumbersHow Does All This Work Together?
House Budget
Senate Budget
President’s Budget
Budget Control Act
Sequestration
Reconciliation
Appropriations
The Congressional Budget Process
Congressional Budget Act of 1974
Congressional Budget Act of 1974
Establishes A Timetable For Congress To Consider Bills
15th Day After A New Session Congress Begins
President Submits Administration's Budget
(Feb 2, 2012)
Congressional Budget Act of 1974
Establishes A Timetable For Congress To Consider Bills
April 15—House And Senate Budget Committees Report
Budget Resolution
Congressional Budget Act of 1974
Establishes A Timetable For Congress To Consider Bills
May 15—Congress Completes Action On Budget Resolution
Congressional Budget Act of 1974
September 15—Congress completes action on bills and resolutions providing new budget authority and new
spending authority.
Congressional Budget Act of 1974
Establishes A Timetable For Congress To Consider Bills
October 1—Beginning of Fiscal Year
What Does A Budget Resolution Do?
What Does A Budget Resolution Do?
The Budget Resolution is a concurrent resolution, meaning it is not sent to the
President for approval or disapproval. Does not have the force of law.
It is solely a Congressional mechanism used to help both the House and Senate
come to agreement on overall spending and tax levels prior to drafting of
appropriation bills or revenue measures for the upcoming fiscal year.
It also sets spending and revenue policies for the next ten fiscal years.
What Is Contained In A Budget Resolution?
What Is Contained In A Budget Resolution?
The amount, if any, of the surplus or the deficit in the budget
What Is Contained In A Budget Resolution?
The recommended level of Federal revenues and the amount, if
any, by which the aggregate level of Federal revenues should
be increased or decreased.
What Is Contained In A Budget Resolution?
The appropriate level of the public debt, and the amount, if
any, by which the statutory limit on the public debt should
be increased or decreased.
What Is Contained In A Budget Resolution?
The appropriate level of total budget outlays and total budget
authority.
What Is Contained In A Budget Resolution?
May include reconciliation instructions
Once the House and Senate have agreed on a final version of
the Budget Resolution, the House and Senate Appropriation
Committees are given aggregate caps on discretionary
spending.
Called 302(a) allocations
The Congressional Budget Process
302(a) allocations represent the maximum amount budget
authority contained in all appropriations bills in the
upcoming Fiscal Year.
Entitlement programs--often called direct spending or
mandatory spending--do not get their budget authority
through an appropriations bill and are therefore not covered
by 302(a) allocations
The Congressional Budget Process
302(a) allocations are further divided up among the 12
appropriation subcommittees
Called 302(b) allocations
The Congressional Budget Process
302(a) allocations are further divided up among the 12
appropriation subcommittees
Called 302(b) allocations
Each Subcommittee of the Appropriations Committee is responsible for making policy decisions on what programs to
fund and what their funding levels are in order to comply with the 302(b) allocations
The Congressional Budget Process
How is a Budget Resolution
Different from the
Budget Control Act?
The Budget Control Act
Enacted in 2011 as part of the compromise to raise the national debt
Established the Joint Select Committee on Deficit Reduction
JSCDR goal was to report a bill that would cut federal deficit over 10
years by $1.2 trillion
Established 302(a) caps in discretionary spending from FY2013 until
FY2021
The Budget Control Act
It does not contain any provisions dealing with revenues
Unless Congress acts the Budget Control Act would allow the Bush-era
tax cuts to be reinstated in full
It does not distinguish between programs considered a priority and those
of lesser importance
It contains no policy recommendation on how to achieve budget savings
The Budget Control Act
Mandates that 50 percent of all discretionary spending cuts must come
from the Defense Department’s budget
Mandatory and discretionary spending are cut proportionally
Mandates sequestration starting with FY2013 and ending in 2021
Exempted many, but not all, human service programs from sequestration
What is Sequestration?
January 2, 2013 sequestration is an across-the-board cut in each non-
exempt account of both mandatory and discretionary spending that
occurs.
Between FY2014 and FY2021 sequestration applies only to
discretionary spending.
It was included in the BCA as a incentive to the Joint Select
Committee on Deficit Reduction to avoid that Committee not act.
What is Sequestration?
It was passed with the intention that it never would happen.
Today many members of Congress and the Administration want to
avoid sequestration because it cuts priority programs as well as non-
priority programs by about 7.5% in January 2013.
How Sequestration Works
The automatic spending reduction process entails three key steps:
How Sequestration Works
1.The amount of spending reduction required for each year is
calculated and divided equally between two categories—Defense and
non-Defense categories
How Sequestration Works
2. The annual amount of spending reductions required each
year in each of these categories is further divided proportionally
between discretionary appropriations and direct spending programs
(excluding certain programs and activities) within each category; and
How Sequestration Works
3.The spending reductions required in each year (FY2013-FY2021) are
achieved through a combination of sequestration and a downward
adjustment of the revised discretionary spending limits.
Discretionary Spending Caps: Post-Sequester(Budget Authority in Billions)
FY2013
Budget Control Act Pre Sequester $1,047
Defense $ 546
Non--‐Defense $ 501
Sequester $ -98
Defense $ ‐55
Non-Defense $ ‐43
Budget Control Act Post--‐Sequester $949
Defense $491
Non-Defense $458
(In billions)
Fiscal Year Original Limits on all Discretionary 2013 $1,047
302(a) Allocations in
Budget Control Act
(In billions)
Fiscal Year Original Limits on all Discretionary 2013 $ 950
302(a) Allocations in
After Sequestration
(In billions)
Fiscal Year Original Limits on all Discretionary 2013 $1,028
302(a) Allocations in
H. Con Res. 112
(In billions)
Fiscal Year Original Limits on all Discretionary 2013 $1,028
302(a) Allocations in H. Con Res. 112
To achieve additional savings the House Budget Resolution includes what are know as reconciliation instructions
What is Reconciliation?
A special procedure to give expedited consideration to bills
enacting the spending, revenue, and debt policies contained in the
budget resolution.
What is Reconciliation?
A special procedure to give expedited consideration to bills
enacting the spending, revenue, and debt policies contained in the
budget resolution.
In order to qualify for these special expedited procedures, both
the House and Senate must agree on the same budget resolution
and it must include reconciliation instructions.
What is Reconciliation?
To trigger these expedited procedures, the budget resolution must
include reconciliation instructions calling on specific committees
to achieve specified amounts of savings in programs within their
jurisdictions.
What is Reconciliation?
The Budget Resolution may include specific recommendations on
how to achieve savings, or raise revenues.
However these are only recommendations.
The committees of jurisdiction choose which programs to address
and which policies to adopt.
They are required to specific changes to current law to their
Budget Committee.
What is Reconciliation?
A reconciliation bill is a way for Congress to review and amend
entitlement programs to reduce spending that otherwise would
not happen.
What is Reconciliation?
A reconciliation cannot be filibuster in the Senate so it is a very
power tool that can be used to break the normal Congressional
deadlock.
What is Reconciliation?
Budget Resolution
House Appropriations Committee 302(a) Caps
Senate Appropriations Committee 302(a) Caps
House Appropriations Subcommittee 302(b) Caps Senate Appropriations
Subcommittee 302(b) Caps
• Agriculture• Commerce, Justice Science• Defense• Energy & Water Development• Financial Services• Homeland Security• Interior, Environment• Labor, HHS, Education• Legislative Branch• Military Construction, VA• State Foreign Operations• Transportation, HUD
• Agriculture• Commerce, Justice Science• Defense• Energy & Water Development• Financial Services• Homeland Security• Interior, Environment• Labor, HHS, Education• Legislative Branch• Military Construction, VA• State Foreign Operations• Transportation, HUD
Final Appropriation Bills
Conference Committees, Draft Compromise Bills
Budget Resolution
Reconciliation Instructions
• Agriculture• Energy and Commerce• Financial Services• Judiciary• Oversight &
Government• Reform• Ways and Means
• Agriculture• Banking, Housing and
Urban Affairs• Commerce, Science
and Transportation• Energy and Natural
Resources• Finance• Health and Education,
Labor and Pensions• Judiciary
House Budget
Committee
Reconciliation Bill
House Senate President
Senate Budget
Committee
Reconciliation Bill
Conference Committee Compromise Bill
HouseSenate
What Does H. Con. Res. 112 Do?
What does the House Budget Resolution do?
House Budget FY2013
Outlays $3,624 billionRevenues $2,734 billionDeficit $ 797 billion
Compared to the President’s budget proposal
Outlays $ -187 billionRevenues $ - 7 billionDeficit $ -180 billion
What does the House Budget Resolution do?
House Budget FY2013
Outlays $3,624 billionRevenues $2,734 billionDeficit $ 797 billion
Compared to the President’s budget proposal
Outlays $ -187Revenues $ - 7Deficit $ -180
Includes Reconciliation instructions
“The welfare reforms of the late 1990s are a success story of modern
domestic policy, but they did not go as far as many think. Reformers
were not able to extend their work beyond cash welfare to other
means-tested programs. Notably, programs that subsidize food and
housing for low-income Americans remain dysfunctional, and their
explosive growth is threatening the overall strength of the safety net.”
Chairman Paul Ryan:
“If the government continues running trillion-dollar deficits and
experiences a debt crisis, the poor and vulnerable will undoubtedly be
the hardest hit, as the Federal Government’s only recourse will be
severe, across-the-board cuts.”
Chairman Paul Ryan:
H. Con. Res. 112Policy Recommendations
H. Con. Res. 112Policy Recommendations
Reduce Spending on the Low Income Home Energy Assistance
Program [LIHEAP].
Assumes the same level of funding for LIHEAP in President
Obama’s fiscal year 2013 budget request.
H. Con. Res. 112Policy Recommendations
Reduce Spending on the Low Income Home Energy Assistance
Program [LIHEAP].
.
LIHEAP provides low-income families with help to pay heating bills.
However, many states are providing families with $1.00 in LIHEAP
benefits in order to increase SNAP benefits. This proposal would
eliminate that abuse.
H. Con. Res. 112Policy Recommendations
Block Grant the Supplemental Nutrition Assistance Program [SNAP].
“Spending on SNAP—formerly known as the Food Stamp Program—has
increased dramatically over the past three years.
SNAP spending grew from $20.6 billion in 2002 to nearly $40 billion in
2008, and is projected to be over $80 billion in 2012.
While the increase between 2008 and 2012 is partially due to the
recession, SNAP spending is forecast to be permanently higher than
previous estimates even after employment has recovered.”
H. Con. Res. 112Policy Recommendations
Block Grant the Supplemental Nutrition Assistance Program
“A variety of factors are driving the high growth in SNAP funding, but one
major reason is that while the States have the responsibility of administering
the program, they have little incentive to ensure it is well run.
The budget resolution envisions converting SNAP into an allotment tailored
for each State’s low-income population, indexed for inflation and eligibility.
This option would make no changes to SNAP until 2016—after employment
has recovered—providing States with time to structure their own programs.”
H. Con. Res. 112Policy Recommendations
Block Grant the Supplemental Nutrition Assistance Program:
“It would also envision improving work incentives by requiring a certain
amount of people to engage in work activity, such as job search,
community service activities and education and job training. This
proposal is estimated to save $122.5 billion over 10 years.”
H. Con. Res. 112Policy Recommendations
Eliminate Broad-Based Categorical Eligibility:
Broad-based categorical eligibility allows for households to be made eligible
through receiving a minimal Temporary Assistance for Needy Families
[TANF] fund benefit or service. Typically, an individual is made eligible by
receiving a TANF brochure or being referred to a social services ‘‘800’’
telephone number. This allows individuals to qualify for SNAP benefits under
less restrictive criteria. For example, 40 states currently have no asset test for
receiving SNAP benefits.
H. Con. Res. 112Policy Recommendations
Reform Supplemental Security Income:
“Welfare programs typically pay benefits on a sliding scale. However, SSI
is different, paying an average of $600 for each and every child in a
household that receives benefits. This reform would create a sliding scale
for children on SSI.”
H. Con. Res. 112Policy Recommendations
Reform Means-Tested Entitlements:
“Congress should act to reform means-tested entitlements. These
programs have grown rapidly over the past 10 years, and Congress
should cap these programs and begin devolving them to the States.
This would build upon the historic progress of bipartisan welfare
reform in the late 1990s. These reforms transformed cash welfare by
encouraging work, limiting the duration of benefits, and giving states
more control over how money was being spent. The TANF reforms of
the old Aid for Families with Dependent Children cut welfare
caseloads in half as poverty rates declined.”
H. Con. Res. 112Policy Recommendations
Terminate the Duplicative Social Services Block Grant:
“The Social Services Block Grant is an annual payment sent to States without
a matching requirement to help achieve a range of social goals, including child
care, health services, and employment services. Most of these are also funded
by other Federal programs. States are given wide discretion to determine how
to spend this money and are not required to demonstrate the outcomes of this
spending, so there is no evidence of its effectiveness. The budget recommends
eliminating this duplicative spending.”
H. Con. Res. 112Policy Recommendations
Medicaid Block Grant
“Medicaid’s flawed financing structure has created rapidly rising costs
that are nearly impossible to check. Mandate upon mandate has been
foisted upon states under the flawed premise that the best ideas for
repairing this important health care safety net can come only from
Washington. This budget ends that misguided approach and instead
converts the federal share of Medicaid spending into a block grant, thus
freeing states to tailor their Medicaid programs to the unique needs of their
own populations.”
H. Con. Res. 112Policy Recommendations
Medicaid Reform
Secure Medicaid benefits by converting the federal share of Medicaid
spending into a block grant indexed for inflation and population growth.
This reform ends the misguided one-size‐fits‐all approach that has tied the
hands of so many state governments. States will no longer be shackled by
federally determined program requirements and enrollment criteria.
Instead, they will have the freedom and flexibility to tailor Medicaid
programs that fit the needs of their unique populations.
H. Con. Res. 112Policy Recommendations
Medicare Reform:
For younger workers, when they reach eligibility, Medicare will provide a
Medicare payment and a list of guaranteed coverage options – including a
traditional fee‐for– service option from which recipients can choose a plan
that best suits their needs. This plan is called primum support. It is
similar to a plan first introduced by former head of CBO Alice Rivlin.
Medicare will provide additional assistance for lower--‐income
beneficiaries and those with greater health care needs.
H. Con. Res. 112Policy Recommendations
Simplifying the Tax Code and Promoting Job Creation and Economic Growth
•Consolidate the current six individual income tax brackets into just two
brackets of 10 and 25 percent.
•Reduce the corporate rate to 25 percent. • Repeal the Alternative
Minimum Tax.
•Broaden the tax base to maintain revenue growth at a level consistent with
current tax policy and at a share of the economy consistent with historical
norms of 18 to 19 percent in the following decades.
What Does The House Budget Resolution Not Do?
What Does The House Budget Resolution Not Do?
Because the resolution is a concurrent resolution, it does not
have the force of law.
What Does The House Budget Resolution Not Do?
It requires the Senate to concur with reconciliation before it
can occur
The House could pass a bill that contains all of the
recommendations included in the budget.
However such a bill would not have the protections built into
reconciliation such as a prohibition on against a filibuster.
What Does The House Budget Resolution Not Do?
Does not amend or eliminate the provisions of the Budget
Control Act, including sequestration.
What Does The House Budget Resolution Not Do?
It does NOT establish discretionary spending caps (302(a))
allocations for the Senate.
The House will have to pass a resolution “deeming” that the
provisions of H. Con. Res. 112 are effective as far as the House
is concerned.
How Does The House Budget Resolution Work In Conjunction With The Budget Control Act?
H. Con. Res. 112 contains language requiring the Budget Committee
to report a bill that eliminates sequestration.
However, that bill shall include language making its application
contingent upon the enactment of a reconciliation bill.
Without a reconciliation bill sequestration
occurs on January 2, 2013
What about a Senate budget?
Senate Majority Leader Harry Reid (D-NV) has made it clear on a
number of occasions that he will not bring a budget resolution to the
floor of the Senate.
What about a Senate budget?
It is the Majority Leader’s position is that the BCA sets
discretionary spending levels and therefore no new Budget
Resolution is necessary.
He believes that when the House agreed to pass the BCA they also
agreed to the spending levels contained in the bill. This opinion is
not shared by House Republicans who view those caps as maximum
spending levels, not actual spending levels.
What about a Senate budget?
Since there is strong opposition to the sequestration provisions of
the BCA, it is highly anticipated that some kind of substitute to
sequestration will be considered but only after the November
elections.
What Happens Next?
The House and Senate will each “deem” their respective 302(a)
allocations and work toward drafting appropriation bills.
No real effort to pass a tax reform bill of any kind is expected until
after the November elections.
What Happens Next?
There will be no reconciliation bill, although the House will produce
a reconciliation-like bill that will lack special procedural
consideration. It will not pass the Senate.
If sequestration is to be avoided, a bill will have to be enacted, most
likely after the elections. What replaces sequestrations is impossible
to predict this time.
What Role Does The President’s Budget Play?
The House of Representatives voted on a substitute budget
resolution to replace the Ryan budget with the President's budget.
It failed on a vote of 0-419. Democrats in the House claimed the
amendment, offered by Rep. Mick Mulvaney (R-SC), a Republican,
was nothing more than a political gimmick to embarrass the
President.
Nether the House nor the Senate will use the President's
recommendations in considering appropriation bills, entitlement
reforms, or revenues measures.
What to expect for the rest of the year as Congress tries to draft appropriations for FY2013?
Do not expect any of the major recommendations contained in either
the President's budget or the House Republican budget to be enacted
in 2012.
What to expect for the rest of the year as Congress tries to draft appropriations for FY2013?
It will be difficult for the House and Senate Appropriation Committees to find common ground.
It is highly likely that the Congress will have to pass at least one, and maybe a series of continuing resolutions to fund much of the
government.
What to expect for the rest of the year as Congress tries to draft appropriations for FY2013?
It is highly unlikely that any bill eliminating sequestration will pass before November. However, after the election, there is a very good
possibility that an alternative to sequestration will be enacted.
What Happens In December?
• The Bush-era tax cuts expire—adding $5 trillion in revenues to the US treasury over the next 10 years
• Sequestration takes effect January 2, 2013 ($98 billion)
• The Social Security payroll tax break expires ($100 billion)
• It is likely that Congress will have to increase the statutory debt limit
• Strong possibility that a continuing resolution to fund the government will need to be passed in December
• The current extension on unemployment benefits expire
• A new Congress, perhaps with different majorities in the House and Senate convenes on January 2, 2013
• The President is sworn in on January 20, 2013
How To Calculate Spending Caps
How To Calculate Spending Caps
Determine Revised Limits on Discretionary Sending
Discretionary spending limits are established in BCA but are subject to revision
How To Calculate Spending Caps
The revised limits on discretionary spending may fluctuate to accommodate:
Emergency requirements
Appropriations for Overseas Contingency Operations/Global War on Terrorism
Appropriations for continuing disability reviews
Appropriations for controlling health care fraud and abuse
Appropriations designed as being for disaster relief
Subtract estimated amount of saving from payments on interest from total amount of spending cuts i.e. $1.2 trillion
How To Calculate Spending Caps
Subtract estimated amount of saving from payments on interest from total amount of spending cuts i.e. $1.2 trillion
Estimated at 18%
$1,200,000,000,000 x .18 = $216,000,000,000
$1,200,000,000,000 - $216,000,000,000 = $984,000,000,000
How To Calculate Spending Caps
Divide target amount equally between Defense and non-Defense spending
$984,000,000,000 ÷ 2= $492,000,000,000 (over nine years)
How To Calculate Spending Caps
Determine how much the deficit must be reduced each year from FY2013 until FY2021 (Total of nine years)
$492,000,000,000 ÷ 9= $54,666,666,666
The $54.7 billion reduction is for both discretionary and mandatory spending combined in each category
How To Calculate Spending Caps
To determine proportions of spending reductions to allocate toward discretionary or mandatory:
Multiply $54.7 billion by discretionary spending cap
Divide by total (discretionary and mandatory) non-exempt spending = reduction in discretionary spending in that category
To determine mandatory amount subject to sequestration simply subtract discretionary reductions from $54.7 billion.
How To Calculate Spending Caps
Example for FY 2014 Non-Defense Category
Discretionary spending cap = $510 billion
$54.7 billion x $510 billion = $27.88 trillion
$27.88 trillion ÷ ($510 billion +~$206 billion) = $38.9 billion
How To Calculate Spending Caps
Discretionary Cap
OMB’s Baseline Estimate for Mandatory Spending
{ {+ =$716 billion in
total non-exempt spending
Example for FY 2014 Non-Defense Category
Discretionary spending cap = $510 billion
$38.9 billion reduction in discretionary spending cap
$15.7 billion reduction in non-exempt mandatory spending
Total savings of $54.7 billion
How To Calculate Spending Caps
Example for FY 2014 Non-Defense Category
Discretionary spending cap = $510 billion
$38.9 billion reduction in discretionary spending cap
$510 billion – $38.9 billion = $471.1 billion (new discretionary spending cap for aggregate appropriations in fiscal year)
How To Calculate Spending Caps
How Sequestration WorksRevised Statutory Limits on Discretionary Spending if Automatic Spending
Reduction Process is Triggered
(in billions of budget authority)
Fiscal Year Revised Security Revised Non-security
Category Category
2013 $546 $501
2014 $556 $471
2015 $566 $520
2016 $577 $530
2017 $590 $541
2018 $603 $553
2019 $616 $566
2020 $630 $578
2021 $644 $590
Example for FY 2014 Non-Defense Category
Discretionary spending cap = $510 billion
$15.7 billion reduction in non-exempt mandatory spending
$15.7 billion cut from $206 billion in mandatory spending via sequestration
How To Calculate Spending Caps
Example for FY 2014 Non-Defense Category
Discretionary spending cap = $510 billion
$15.7 billion reduction in non-exempt mandatory spending
$15.7 billion cut from $206 billion in mandatory spending via sequestration
$15.7 billion is 7.6% of $206 billion, so all non-exempt programs in the non-Defense category would be reduced by 7.6%.
How To Calculate Spending Caps
Example for FY 2014 Non-Defense Category
Discretionary spending cap = $510 billion
$38.9 billion reduction in discretionary spending cap
Medicaid is exempted from sequestration and Medicare provider cuts are limited no more than 2%.
Any cuts for Medicare provider benefits above 2% are subtracted from the discretionary spending cap
Final discretionary spending cap reduction is $38.9 billion + the additional Medicare cuts above 2%
How To Calculate Spending Caps
Why is the Budget Control Act and sequestration so important?
Sequestration in Mandatory spending for FY2014 is estimated at about 7.5%
A budget in FY 2013 of $1, 000,000,000 lowered 7.5% each year for ten years would have $495,764,693 in FY2021
Or less than 50% of its FY2013 funding