Saturday, February 21, 2009

The Daily Strike-2/21/09-Budget Matters

Happy Saturday and welcome to the Daily Strike!

BUDGET: The Washington Post, along with other outlets, is reporting on the early details of Obama's budget proposal, which he will unveil Thursday. As The Big Picture has said, this first paragraph is music to a liberal's ear:

"President Obama is putting the finishing touches on an ambitious first budget that seeks to cut the federal deficit in half over the next four years, primarily by raising taxes on business and the wealthy and by slashing spending on the wars in Iraq and Afghanistan, administration officials said."

The proposal aims to halve the current budget deficit by 2013, a tall task given the federal bailouts and the recently enacted stimulus. Obama also will not be using the same gimmicks Bush used to make the projected deficit seem smaller. Bush never put the cost of the Iraq and Afghanistan wars in his budget proposal. He instead would request it separately as "emergency funding." He also would pretend that Congress wouldn't provide a temporary fix each year to save millions of taxpayers from being affected by the Alternative Minimum Tax.

Obama's budget even accounts for spending on anticipated natural disasters, like hurricanes, and for ambitious proposals to fund health care reform and energy legislation. We'll wait until next Thursday to discuss the full proposal, but today's article gives us a clue as to how different the new administration's priorities will be.

BUDGET PROCESS: With this news, it seems like an appropriate time to go over the budget process, which is unnecessarily complicated. Obama will formally present his proposed Fiscal Year 2010 budget on Thursday. The funny thing, is that we still don't have a completed 2009 budget. The fiscal year begins on October 1st, but Congress and the President almost never agree on a budget by then. Usually, they'll pass what's called a "Continuing Resolution" which funds the government at current levels. Bush and the Democratic Congress passed one of these last September to fund the government into early March. This week, Congress is expected to pass a budget for this year through September, which will reflect, most likely, some Democratic priorities (we still don't quite know what's in this proposal yet).

After this is passed, we can finally start thinking about next year's budget. Congress first has to agree on a non-binding budget resolution, which sets overall spending targets. The resolution usually passes on party lines, and is not subject to a filibuster. Next, each Appropriations subcommittee in the House and Senate (there are 13 of them) passes individual spending bills that conform to the budget resolution targets. The bills are voted on in each full chamber, and then reconciled in a conference committee before being passed and sent to the President. This whole process is usually very slow, since it is customary to allow all sorts of amendments to appropriations bills.

The other wrinkle is that usually only a few of the individual appropriations bills are sent to and signed by the President. The others are packaged together in an omnibus bill, which is usually a compromise reached between Congress and the White House. By the time the President has signed the full budget, it is frequently December or later. Therefore, the government usually is funded through continuing resolutions for at least three or four months. The process could potentially be easier since Barack Obama is working with a Democratic Congress.

Of course that whole process only applies to one particular type of spending, discretionary spending. The budget is made up of mandatory spending (which consists of programs already mandated by law, such as Social Security, entitlements, and other government programs) and discretionary spending. To change mandatory spending, Congress will typically include a "reconciliation order" in the budget resolution. This requires appropriate committees in each chamber to "reconcile" mandatory spending levels to an amount specified in the budget resolution. Once the committees finish their work, Congress must bass an Omnibus Reconciliation Bill, which combines all of the committee's revised budgets. This bill is also not subject to a filibuster, and is typically a vehicle with which the majority party exerts power to change budgetary priorities. Reagan used it to cut spending and cut taxes, Clinton used it to cut spending and raise taxes on the rich, and Bush used it for his 2001 tax cuts. If Obama wants to raise taxes on corporations/hedge funds etc. this year, he'll probably have to use the reconciliation process.

Phew. Any questions? This process is pretty complicated, so if you need any more information on it, and you don't want to read Wikipedia or, you can ask me.

OBAMA RADIO ADDRESS: The President's radio address centered around the stimulus bill. The biggest news making item is that the Treasury Department will soon adjust the withholding amount on most paychecks, meaning that the average tax payer will earn an extra 65 bucks per month, starting April. I'm not sure that this will be stimulative (people generally use this money to pay off debt) but it is politically smart, since people will be seeing the effects of the stimulus package promptly.

GOVERNORS: The nation's governors are meeting this weekend in Washington for the National Governor's Association's annual conference. One notable absence is Alaska's Sarah Palin, who is busy with who knows what. Other potential 2012 GOP candidates, like Charlie Crist of Florida and Bobby Jindal of Louisiana will be in attendance. Democratic governors today criticized some of their Republican counterparts for threatening to refuse stimulus money. Governor Ed Rendell of Pennsylvania went as far as predicting that no governor will actually turn money down when all is said and done. Brian Schweitzer, the Democratic governor of Montana, implicitly attacked Bobby Jindal of Louisiana for refusing to accept money for increased unemployment assistance.

The governors meet tomorrow night at the White House for a banquet with the President.

Almost time for me to pick up Mother Strike from the airport. Have a good night!

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