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May 4, 2011
Despite bin
Laden News, Budget Talks Share Spotlight
Just prior to
adjourning for the Easter recess two weeks ago, Congress was able to
reach agreement on a Fiscal Year 2011 (FY11) package to fund the
federal government through the end of the current fiscal year, which
ends on September 30. The package included $38.5 billion in
cuts below enacted FY10 levels.
Following its passage in the House, that chamber moved immediately to
consider Budget Chairman
Paul Ryan's (R-WI) FY12 Budget, which calls for $6 trillion in
cuts over the next 10 years. The Chairman's Budget passed 235-193.
Having been subjected to substantial criticism regarding his initial
FY12 Budget, President Obama addressed the country shortly after the
FY11 deal was reached. During the speech, the President called
for $4 trillion in deficit reductions in 12 years or less, focusing
on both mandatory, discretionary and revenues. Mr. Obama's plan
also features a "Debt Failsafe Trigger" that will force
deficit reductions beginning in 2014 if Congress is unable to
legislate them.
The Senate has yet to present its budget blueprint
in large part because of the ongoing efforts of the "Gang of
Six" -- three Democrat and three Republican senators working to
reach a compromise on a long-term fiscal policy that can pass
the Senate.
One of its members, Senate Budget Chairman Kent Conrad
(D-ND), has resisted proceeding on a budget resolution so that the
final product could mirror the Gang of Six recommendations.
However, because a compromise is not imminent, Mr. Conrad released
basic details of his own budget plan this week, which includes $4
trillion in reductions over 10 years. According to Mr. Conrad,
his plan does more to protect Medicare and relies one $1 trillion in
savings through unspecified tax reforms.
Over the past two weeks, Republicans have been met with
hostile crowds at local town hall meetings over Mr. Ryan's
budget. Most of the criticism has focused on the plan's
Medicare reforms. Republicans were quick to accuse Democrats of
manufacturing dissent through groups like MoveOn.org.
Nevertheless, even House Speaker John Boehner (R-OH)
refrained from fully embracing the Ryan budget, saying
"It's Paul's idea. Other people have other ideas.
I'm not wedded to one single idea."
Last week, Treasury Secretary Timothy Geithner
extended the deadline for a U.S. default on its debt until August 2,
three weeks later than previous estimates, due to "stronger than
expected tax receipts."
Republicans have demanded that any vote on
increasing the $14.3 trillion borrowing limit needs to be
accompanied by deep spending cuts. However, with so much
time ahead of a potential default, House Republicans are
considering giving Democrats what that have been clamoring for -- a
clean vote on increasing the borrowing limit.
Republicans are convinced that getting Democrats on
record voting to increase the limit without addressing the deficit is
a winning political strategy. And with so much time left for
negotiations, holding the vote sooner rather than later
minimizes the risk that moderate Republicans will
join Democrats.
If you have any questions concerning these issues,
please contact Chris Wagner at 202.772.0924 or cwagner@clarkhill.com.
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