Federal budget battle: Can Congress avoid a government shutdown?

Congress heads into a new budget season with an unusually broad disparity of views on the way forward, signaling that “getting to yes” on a budget deal could be especially difficult this year.

In his State of the Union address, President Obama offered a bifurcated vision: a five-year freeze on discretionary federal spending, expected to save $26 billion over the five years, but also new investments in education, renewable energy, infrastructure and basic research. Net spending: to be determined in the president’s FY 2012 budget, to be released next month.

House Republican leaders are calling for even deeper spending cuts, beginning in the current fiscal year. On Tuesday, the House voted to reduce non-security related discretionary spending to fiscal 2008 levels. Fifteen moderate Democrats joined Republicans in this otherwise party-line vote, which passed 256 to 165.

Deficit commission plan: Four points of contention – and agreement

But there is a wide range of views within GOP ranks on how deep the cuts should go, effective this year. House GOP leaders are calling for $100 billion annualized. That’s about $60 billion for 2011, since the fiscal year began on Oct. 1.

By contrast, Senate Democrats are wary of spending cuts when the economy is still recovering.

“We’re seeing everything from pro-stimulus spending to slash-and-burn [proposals],” says Robert Bixby, executive director of the Concord Coalition, a fiscal watchdog. “Republicans have some real problems now with a lot of their newly elected members, who are not accepting the fairly traditional boundaries in which these debates were held.”

The newly empowered Republican Study Committee (RSC) – the House GOP’s conservative caucus, whose membership grew to 176 from 115 in the last Congress – wants $100 billion cut from the 2011 budget. Other Republicans, however, are proposing to cut far more, $500 billion or even, symbolically, $1.5 trillion, the estimate for the FY 2011 federal deficit released Wednesday by the Congressional Budget Office.

“I don’t think the president understands what the American people wanted” in the last election, says Rep. Jim Jordan (R) of Ohio, chairman of the RSC, which also called this week for $2.5 trillion in cuts over next 10 years. A five-year freeze is like “someone consuming 10,000 calories a day who decides to lose weight by freezing consumption at that level.”

Freshman Sen. Rand Paul (R) of Kentucky released a plan this week calling for $500 billion in cuts in the current year. On Wednesday, 21 GOP senators introduced a balanced budget amendment to the Constitution.

“Millions of working families across the country balance their checkbook every year, and their government should do the same,” said Sen. John Cornyn (R) of Texas.

A lesson for the public

On the House side, Rep. Steve King (R) of Iowa says that the House should take up a proposal for $1.5 trillion in spending cuts, just so that the public has an accurate sense of what’s involved in the range of cuts needed to balance the federal budget.

“Are we committed to a balanced budget?” he asks. “If so, we must tell Americans what we have to do to get there.”

In the official Republican response to the president’s address, Rep. Paul Ryan (R) of Wisconsin noted that Mr. Obama had signed into law domestic spending increases of 25 percent, or 84 percent if you count temporary stimulus spending.

“All of this new government spending was sold as investment. Yet after two years, the unemployment rate remains above 9 percent, and government has added over $3 trillion to our debt,” he said, in a televised response. “Then the president and his party made matters even worse by creating a new open-ended health-care entitlement.”

As chair of the House Budget Committee, Ryan has been tasked with setting a cap for FY 2011 spending. Since the last Congress never completed a budget or spending bills, the government has been funded by a continuing resolution, which expires on March 4. House leaders say that the Appropriations Committee will take up a bill to fund the balance of the fiscal year, which will come to the floor the week of Feb. 14.

But deep cuts for FY 2011 that pass in the House face trouble in the Democrat-controlled Senate.

“Economists tell us that you could jeopardize the strength of the recovery if you make too draconian cuts now,” says Sen. Kent Conrad (D) of North Dakota, who chairs the Senate Budget Committee.

Major cuts in programs

Economist James Horney, director of federal fiscal policy at the Center on Budget and Policy Priorities, says that the House GOP plan to cut $100 billion out of non-security discretionary spending would mean a 21 percent cut on domestic programs.

“It would remove substantial purchasing power from a weak economy, thereby costing hundreds of thousands of jobs and raising risks of a double-dip recession,” he writes in a Jan. 21 report. If the RSC’s 10-year, $1.5 trillion plan prevails, that would cut non-defense spending by 42 percent and “decimate key services,” he adds.

Commenting on competing views on this issue, the Concord Coalition’s Mr. Bixby concludes: “They’re so far apart that it’s going to take a crackup until finally the public clearly has had enough of it and wiser heads prevail.

“I would not be surprised to see some sort of on again-off again shutdown this spring,” he says, “until the point where the public and the business community and the markets all say: Knock it off!”

Deficit commission plan: Four points of contention – and agreement