Efforts to Cut Federal Budget in 2011 Prove To Be No Cup of Tea
Rob Randhava
Spurred on by the electoral victories of conservative tea party-backed candidates in 2010, a new majority in the U.S. House of Representatives engaged in a series of efforts to drastically slash the federal budget. Each attempt triggered intense debates over taxes, spending, and the nature of federal government itself. For advocates concerned with helping unemployed people, preserving important safety nets, and restoring economic growth, 2011 wound up being a very busy year.
Just before 111th Congress adjourned in late 2010, it agreed to extend the federal emergency unemployment insurance program for another year. In an effort to provide a boost to the economy, it also enacted a small one-year cut in payroll taxes. But it was unable to reach an agreement on appropriations levels for the new Fiscal Year, so it provided only a few more months of funding and left the 112th Congress to set spending levels for the rest of the year. When the new House leadership resumed that debate in early 2011, it quickly became clear just how much the mood of Congress had changed.
In February, the House passed an appropriations bill that cut $1 billion from Head Start, and reduced Pell Grants by 15 percent. The House also loaded the bill with a number of controversial legislative provisions, including a measure to block a Department of Education rule that governed private for-profit colleges, and to prohibit Planned Parenthood, Inc., from receiving any federal funding. The Leadership Conference on Civil and Human Rights and its allies were quick to denounce the measure. Fortunately, the bill also faced strong resistance in the Senate and from President Obama. After several months, and after several standoffs that nearly resulted in a shutdown of the federal government, Congress and Obama reached an agreement in April that cut federal spending by only $37.6 billion from the previous Fiscal Year and left most education and social welfare spending intact.
House Republicans were disappointed with the final package, and many even opposed it because they felt it did not cut spending enough. But they quickly redoubled their efforts. As the appropriations bill was being finished, the House moved forward with its next effort, a budget resolution, sponsored by Budget Committee Chairman Paul Ryan, R. Wis., which outlined federal spending levels for the next decade.
If the Fiscal Year 2011 appropriations bill was controversial, the Ryan budget was downright explosive. It proposed cutting Medicaid spending by $1.4 trillion over the next decade, as well as huge cuts to food stamps, education, transportation, and jobs programs. It also extended Bush-era tax cuts that favored the wealthiest Americans, meaning that it was not a serious effort to balance the federal budget. What proved to be most controversial, however, was a proposal to cut Medicare and to eventually replace it with a system of private vouchers.
For many civil and human rights advocates, the Ryan budget was a non-starter. The Leadership Conference denounced the bill as “draconian.” Following an intense public backlash over the Medicare voucher provision, the Senate rejected the Ryan plan in May.
Again, House Republicans were disappointed. But they quickly turned to what they saw as a new source of leverage in their effort. In August, the federal government was expected to reach its debt ceiling, which meant that without additional action by Congress, the government would become unable to borrow additional money to fund its operations and would default on its existing debt. House Republicans signaled that they would not support an increase in this debt ceiling unless the Senate and Obama agreed to massive cuts in existing spending.
If the Ryan budget was explosive, the threatened default was downright reckless. Many economists from both parties were quick to warn that the consequences of a government default would be catastrophic. It would essentially turn the federal government into the world’s largest “subprime” borrower, devastating the economy in the process.
For several months, a bipartisan team of senators, working with Vice President Joe Biden, tried to negotiate a compromise. These negotiations, however, did not go far. Taxes proved to be the biggest sticking point. Most congressional Democrats and Obama argued that the only fair and responsible way for Congress to reduce the federal deficit was to increase taxes at the same time that it cut spending. For most House Republicans, however, any increase in taxes—even the elimination of tax loopholes that favored corporations or the wealthy—was simply out of the question. Indeed, in the months before the 2010 elections, many Republicans had signed a pledge to oppose any tax increase, and they saw themselves as locked in by that promise.
Just before the August deadline, congressional negotiators reached an agreement. It raised the debt ceiling in several steps, which would put the issue to rest until early 2013. It also immediately cut discretionary spending by $917 billion over the next decade. It required the House and Senate to vote on a constitutional balanced budget amendment, but neither chamber was able to muster the two-thirds vote necessary to send it to the states. Finally, the deal established a bipartisan House-Senate “supercommittee” to come up with an additional $1.2 trillion in savings, but the deal specified that if no agreement was reached, that amount would be cut through an automatic process known as “sequestration.”
Not surprisingly, the supercommittee never reached an agreement, so the additional $1.2 trillion in cuts will be automatic beginning in January 2013. But it may be a better deal than anything that would have emerged from the supercommittee. Half of the cuts will come from defense spending. The other half will come from domestic spending, but Medicaid, Social Security, and veterans benefits will be protected.
With the budget debate largely put to rest until 2013, Obama has shifted the debate away from deficit reduction to the issue of job creation. In September, following a high-profile speech to Congress, he proposed a new bill, dubbed the American Jobs Act. It included a number of measures that would stimulate job growth and investment, and many of its provisions had long enjoyed bipartisan support. The bill got a cool reception on Capitol Hill, however. The House leadership ignored the proposal, and it was blocked in the Senate by a filibuster. The only part of the bill that passed was aimed at helping unemployed veterans.
As the first session of the 112th Congress drew to an end, there was one last key fight over spending and jobs. The unemployment insurance and payroll tax cut provisions enacted in December 2010 were set to expire and Obama insisted on another year-long extension. The House passed a bill that would have done this, but its version of the bill—which included a provision requiring drug testing as a condition for receiving unemployment benefits—was so controversial that Obama promptly issued a veto threat. Senate Republicans, fearing a political backlash, agreed to a two-month extension, which passed the Senate overwhelmingly (89-10). The House initially rejected the compromise. But House members found themselves in an untenable position: after campaigning on a “Tea Party” message in 2010, House Republicans would have been responsible for a tax increase, and a politically unpopular one at that. Even many Senate Republicans were openly critical of the House move. After several days of backlash, and even though most members of Congress had already gone home for the holidays, on December 22, the House finally agreed to the two-month extension.
The new House majority will begin its 2012 session having already suffered several major setbacks in its effort to radically downsize the federal government. It will likely agree to again extend the payroll tax cut and unemployment insurance when the current deal expires in February. With the 2012 election approaching, lawmakers may be hesitant to again allow their budget-cutting agenda to take the government to the brink of a shutdown. Given the fierce partisan tensions that continue to run high, however, it is difficult to foresee what Congress will do in 2012 to reduce unemployment, increase revenues, or restore long-term economic growth.
Rob Randhava is senior counsel for The Leadership Conference on Civil and Human Rights and The Leadership Conference Education Fund and specializes in immigration and housing/finance issues.
