House and Senate negotiators are thought to be close to resolving differences in their budget plans. The result, if agreed to by both chambers, will set the appropriations totals for the year starting October 1, and is expected to place on a fast track proposals to slash at the Affordable Care Act. The agreement by the House-Senate conference committee could be announced early this week, with votes on the floor by week’s end.
The budget resolutions passed by both House and Senate were similar in important respects. They both claimed to balance the budget within the next decade by massive cuts to mandatory programs such as Medicaid, SNAP, and the Affordable Care Act and by cutting appropriations even more deeply than current law would require. Both budget plans would make 69 percent of their non-defense cuts in programs serving low- and moderate-income people, according to the Center on Budget and Policy Priorities.

There were some differences, however, with implications for almost every federal domestic program.  The House budget, for example, would cut appropriations nearly $1 trillion below current law’s sequester levels over 10 years; the Senate would cut $400 billion below sequestration. (Sequestration refers to required cuts to defense and non-defense spending of about $110 billion a year if the law is not changed.) These cuts would hit education, housing, job training, and services for children and seniors, as well as environmental, medical research, and public health programs. The House would instruct many different committees to come back with savings proposals subject to fast-track rules in the Senate; the Senate version of the budget would only direct those instructions to the committees with jurisdiction over the health care law. Rumors at this writing are that the final budget will limit the fast-tracking (known as “reconciliation”) to the health care law.

Pentagon Spending Going Up. Some of the differences in the budgets would affect the way military spending is handled. While both budgets would cut below sequestration levels over ten years, in FY 2016, the only year where spending levels are really binding, they purport to stick to the sequester levels. (The President’s budget rejected the deeper cuts imposed by sequestration, and added $37 – $38 billion more each to defense and to non-defense appropriations.) House and Senate budgeters are under a great deal of pressure to add at least $35 billion beyond the $523 billion allowed under the defense sequester cap. They chose to get around that limit by adding money to uncapped war funding (Overseas Contingency Operations (OCO) funds). OCO is supposed to be used only for war-related purposes – supporting troops in or departing from Iraq and Afghanistan. But budget decision-makers have dropped all pretense that OCO is solely for war funding, and have jacked up OCO to $96 billion (up from the President’s request of $58 billion for this purpose).

Although both the House and Senate set OCO at about $96 billion, the Senate budget included a point of order against raising OCO beyond the President’s $58 billion level. That would mean adding the extra money into OCO would require 60 votes. The House majority does not want to make it harder to pad the OCO account, and some defense proponents in the Senate, notably Senator McCain (R-AZ) have threatened to vote against the budget if it includes this point of order. It is highly unlikely that it will be included in the final budget.

Congress shares the authority to designate funding to be included in the uncapped OCO account with President Obama. If he refuses to designate the $96 billion as appropriately war-related, the funding cannot be spent. That will be an important source of leverage for the President as he seeks to bring congressional leaders to the table for a deal that increases appropriations beyond the sequestration levels for both defense and domestic programs.

No Commitment to Parity for Pentagon and Domestic Spending. In previous budget agreements, there was an even-handed approach to defense and non-defense appropriations. Both either took equivalent cuts or gained equal amounts. But while President Obama has continued to insist on parity, negotiators for the congressional majority plan to use OCO to raise Pentagon spending, while leaving domestic and international appropriations at the restrictive sequestration levels for FY 2016.

Even more constraints on domestic appropriations?  A number of provisions in the Senate budget resolution would close off some ways of loosening the caps for domestic programs. One would phase out the use of savings from mandatory programs from being applied to discretionary spending. This practice (Changes in Mandatory Programs, nicknamed “CHIMPS” by budgeteers) added $19 billion to domestic appropriations this year. The Senate budget would keep it at $19 billion in FY 2016, but gradually eliminate it by FY 2021. The loss of CHIMPS and other new constraints in the Senate budget (but not in the House version) would tighten the screws on domestic appropriations still more – the opposite of the “safety value” provided to defense spending through OCO. It is not yet known if these constraints will be in the final budget resolution.

SSDI Shortfall. Social Security Disability Income (SSDI) is expected to be underfunded within the next few years. Under current law, funds could be transferred from the Social Security trust fund to pay for the SSDI shortfall. The House budget version prohibits this, and would use the shortfall as a way to force changes to benefits and/or eligibility for Social Security and SSDI. The Senate budget does not have this provision; it is not known whether it will be included in the joint budget plan. Even if it is included, such cutbacks could not be implemented without passing legislation, which could be vetoed by the President.

Revenues. The House and Senate budgets are vague about what they would do about revenues. Both House and Senate would repeal the health care law, and along with it the $1 trillion in revenues it would generate over the next decade. However, they do not show revenues being reduced over this period, without explaining what will replace the repealed taxes. The House is specific in saying it will eliminate the Alternative Minimum Tax, and the Senate expressly calls for continuing business tax cuts which would otherwise expire. Those actions would lose at least $1 trillion over ten years, from revenues collected disproportionately from upper- income people. On the other hand, both House and Senate would allow the improvements to low-income tax credits expire, pushing 16 million people, half of them children, into poverty or deeper poverty, according to the Center on Budget and Policy Priorities.

Getting Past the Budget Resolution to a Post-Sequester Deal? The Senate budget included an amendment sponsored by Senator Kaine (D-VA) and with bipartisan support to make it possible for Congress to agree later on a deal to exceed the sequestration caps by making up the increased spending by an unspecified combination of new revenues and cuts in mandatory programs. There are press reports that the final budget resolution will include a version of this, but, significantly, without any mention of new revenues as a replacement for the sequester cuts.

Reconciliation Instructions – Fast-Track Cuts. If Congress can agree on a joint budget resolution, it can include reconciliation instructions – directives to specific committees to produce bills making savings in mandatory programs (such as Medicaid, SNAP, Medicare, the Affordable Care Act, etc.). When those bills are taken up in the Senate, debate would be time-limited. Because reconciliation legislation cannot be filibustered, it can pass the Senate with only a simple majority, instead of the 60 votes required in most other Senate deliberations. As noted above, while the House was willing to subject many different programs to such fast-tracked cuts, it is now expected the joint resolution will only seek reconciliation bills out of the committees with jurisdiction over changes to the Affordable Care Act. Those committees will be asked to draft their legislation by some point in June or July. The deadline will leave enough time to know the outcome of the upcoming Supreme Court decision on whether federal subsidies to individuals’ health insurance can be paid when states did not create their own insurance exchange, but instead use the federal exchange.

For more information on the House and Senate budget resolutions, see the March 20 Human Needs Report. Stay tuned to the Human Needs Report and CHN’s blog, Voices for Human Needs, for updates.

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