House of Representatives Budget Resolution for FY2013

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.


Sequestration is replaced with cuts to non-defense discretionary and

mandatory spending (which would be accomplished through budget

reconciliation).


Calls for reforming state grant programs, with Medicaid and the

Supplemental Nutrition Assistance Program (SNAP) specifically identified

for possible conversion to block grants.


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.


April 3, President Obama characterized

the Ryan budget as

“Social Darwinism” .

The survival of the fittest basically at the expense of others.


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


Establishes A Timetable For Congress To Consider Bills

15th Day After A New Session Congress Begins

President Submits Administration's Budget

(Feb 2, 2012)



April 15—House And Senate Budget Committees Report

Budget Resolution



May 15—Congress Completes Action On Budget Resolution


September 15—Congress completes action on bills and resolutions providing new budget authority and new

spending authority.



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?


The amount, if any, of the surplus or the deficit in the budget


The recommended level of Federal revenues and the amount, if

any, by which the aggregate level of Federal revenues should

be increased or decreased.


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.


The appropriate level of total budget outlays and total budget

authority.


May include reconciliation instructions

(more on this later)

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


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


302(a) allocations are further divided up among the 12

appropriation subcommittees

Called 302(b) allocations


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


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


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


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:


1.The amount of spending reduction required for each year is

calculated and divided equally between two categories—Defense and

non-Defense categories


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


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


After Sequestration

(In billions)



H. Con Res. 112

(In billions)


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.


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.


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.


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.


A reconciliation bill is a way for Congress to review and amend

entitlement programs to reduce spending that otherwise would

not happen.


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.


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


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.


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.


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.”


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.”


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.”


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.


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.”


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.”


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.”


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.”


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.


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.


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?


Because the resolution is a concurrent resolution, it does not

have the force of law.


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.


Does not amend or eliminate the provisions of the Budget

Control Act, including sequestration.


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.


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.


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.


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.


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


Determine Revised Limits on Discretionary Sending

Discretionary spending limits are established in BCA but are subject to revision


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


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


Divide target amount equally between Defense and non-Defense spending

$984,000,000,000 ÷ 2= $492,000,000,000 (over nine years)


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


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.


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


Discretionary Cap

OMB’s Baseline Estimate for Mandatory Spending

{ {+ =$716 billion in

total non-exempt spending



$38.9 billion reduction in discretionary spending cap

$15.7 billion reduction in non-exempt mandatory spending

Total savings of $54.7 billion





$510 billion – $38.9 billion = $471.1 billion (new discretionary spending cap for aggregate appropriations in fiscal year)


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




$15.7 billion cut from $206 billion in mandatory spending via sequestration





$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%.





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%


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

House of Representatives Budget Resolution for FY2013

Documents

Transcript of House of Representatives Budget Resolution for FY2013