Budget Fight: GOP & Dems Dig in For Round Two

While the media is focused on the House GOP CR and the coming debt ceiling fight, there's another battle that's been forgotten: the 2012 fiscal year budget.

The Monongahela, Allegheny and Ohio Rivers converge in Pittsburgh.  Most readers will find that fact neither new nor particularly insightful.   Sometimes those rivers have teamed up to simply overwhelm their banks, flooding the city.  Thus, the famous saying by former Pittsburgh Mayor Tom Murphy, “My mother always used to warn me, make sure you’re home before dark and don’t go near the rivers.”

Washington, D.C., may soon learn about the dangers and confusions surrounding the convergence of three rivers, metaphorically.

While present media concentration has been on congressional action on the FY11 Continuing Resolution (CR) for Appropriations and the looming increase in the federal debt ceiling, a third legislative river finds itself largely ignored—formulation of the FY12 federal budget.

These three legislative rivers threaten to converge this late spring or early summer, leaving Congress with a complicated and chaotic fiscal flood.

Budget geeks, like I am, find a slightly sinful pleasure in watching this unfold.  We have been through this before—the 1985 Gramm-Rudman-Hollings adventure, the 1990 and 1993 budget wars, the 1995-6 shutdowns of the government, and the 1997 “Andrews Agreement” that led to four balanced federal budgets.

This time may prove even more demanding than any of those previous efforts.

Here’s the rundown:

a.) Congress confronts another extension of the FY11 CR on March 18;

b.) Hearings on the FY12 budget recommendations from the President have begun;

c.) Treasury now predicts a breach of the debt ceiling between April 15, 2011, and May 31, 2011.

d.) House and Senate Budget Committees begin final deliberations on the FY 12 Congressional Budget Resolution in April, with House and Senate approval, followed by a conference, by the beginning of summer.

e.) Based upon that Budget Resolution, the various committees of the Senate and House, and the Sub-Committees of the Appropriations Committees, begin their work to comply with the spending and revenue totals in the resolution and any Reconciliation Instruction attached to the resolutions.

Now, isn’t this fun so far?

So, theoretically, Congress could have to pass another (third) FY11 CR, just about the time that the debt ceiling reaches its legal limit, and while the Budget Committees try to put together the FY12 budget.

As a former Senate Budget Committee staff director, I have to warn folks:  “Lock the windows so staff can’t jump.”

Let’s make a couple of assumptions now.

a.) Congress will not and cannot produce a comprehensive deficit and debt reduction agreement and put it into law in the next 6 months;

b.) Some sleight-of-hand will enable congressional leadership to pass another FY11 CR, but with considerably less spending restraint than advertised.

c.) It will prove extremely difficult, if not impossible, to pass budget resolutions in either the House or Senate, let alone a conference agreement on the budget for FY12.

d.) Thus, even if Congress reaches some “Process/deficit reduction” agreement, to actually save money that agreement will have to become law.

e.) In the past, such initiatives required the use of the Reconciliation Process, a critical part of the budget process;

f.) But, if Congress doesn’t pass a Budget Resolution, it cannot use the reconciliation process to demand that the relevant committees make changes in laws within their jurisdictions to meet the spending and revenue goals demanded in the FY12 budget.

A Rubik’s cube indeed;  but one in which the colors change without warning—what will new House GOP members think of voting for a budget resolution that contains trillion dollar deficits?  What kind of process reform will gain the confidence of Senator and House members?  How can that process really get at the underlying reality that achieving real debt stabilization requires painful changes in Medicare, Medicaid, Social Security and other pensions, and other entitlements (like farm subsidies)?

One rule of thumb that always holds:  “Don’t believe anyone who tells you that he or she knows how this will all turn out.”

And don’t believe anyone who tells you that they can predict flooding on the Three Rivers.

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