The federal budget: How low will it go?

The federal budget: How low will it go?

The business of cutting the federal budget has begun.  The question is:  how low will the budget go?  

There is general agreement in the Congress and in the body politic that the record-high federal budget deficits ($1.3 trillion in FY2010) are a huge problem and must be cut drastically.  And there also seems to be general agreement that a sharp cut in the federal discretionary budget (that part of the budget enacted in appropriations by Congress), which totaled over $1.2 trillion in FY2011, must be an important part of the solution to this problem.  Proposals from across the political spectrum have recommended a variety of approaches to making these cuts.  

In November, the National Commission on Fiscal Responsibility and Reform, appointed by President Obama, recommended keeping the FY2012 budget at the FY2011 level and reducing the FY2013 budget to the FY2008 level, in real terms. 

The Republican party’s Pledge to America, released prior to the November elections, proposed cutting at least $100 billion from the FY2012 budget, excluding defense and programs for veterans and seniors. 

After the 112th Congress convened earlier this month, the House Republican Study Committee (RSC) proposed “The Spending Reduction Act of 2011” (H.R. 408), which would set the non-security budget (excluding defense, Homeland Security, and veterans programs) for the last seven months of FY2011 (after the current Continuing Resolution expires) at the FY2008 level.  The RSC plan would also cut $2.3 trillion from the non-security budgets for FY2012-2021 by freezing budgets at the FY2006 level. 

But all the talk about cutting non-security budgets does not mean that defense will get a pass.  In early January, Defense Secretary Gates announced a defense efficiencies plan in which the president’s FY2012-2016 defense budget plan would be almost $80 billion lower than the plan submitted last year.  And, many congressional leaders have said that all federal programs should be considered for reduction, including defense. 

These proposals to cut federal budgets are prolog to the game-like, but very serious business of legislating that will play out in Congress over the next nine months.  Yesterday that business began, as both the President and the Republican-controlled House made their first moves.  In his State of the Union address last night, President Obama said he will submit a budget plan that sets a five-year freeze on the non-security discretionary budget.  Earlier in the day, the House approved a resolution (H.Res. 38) that called for the House Budget Committee (HBC) to set allocations for non-security appropriations for the last seven months of FY2011.  

How this budget cutting business will end is anyone’s guess.  There are still many uncertainties, including the pace of economic recovery and how congressional Democrats, especially in the Democrat-controlled Senate, will react.  It will be a long and frustrating process, with changing tactics and surprise moves.  But, one thing is clear, future federal budgets undoubtedly will be lower than now planned.   And, the pressure to make reductions to both nondefense and defense budgets will not stop with the FY2012 budget cycle.

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