Looking ahead on the FY2014 budget

This week, the seemingly never-ending fiscal policy skirmishes on Capitol Hill revolved around proceeding to a conference committee to hammer out an FY2014 joint budget resolution compromise. Unlike recent years, this budget season has seen both House Republicans and Senate Democrats produce and pass budget resolutions. Now Congressional Democrats are interested in moving forward on discussions toward a budget for FY2014. The problem? After haranguing Senate Dems for not having produced a budget resolution since 2009—before Senator Patty Murray (D-WA) was chairwoman of the Budget Committee—and maligning President Obama for being late in producing his budget alternative, Republicans are refusing to appoint conferees and commence a budget conference committee. Instead of moving forward with the budget process, the GOP has insisted on conditioning the appointment of conferees with an insistence that any conference report not include any new revenue or raise the debt ceiling. In other words, a non-starter.

Given how broken the budget process has been of late, it’s worth a reminder on what a normal spring budget season should look like. Each year, Congress is supposed to develop a joint budget resolution that sets limits on spending, particularly appropriations, as well as targets for federal revenue. After the Office of Management and Budget publishes the president’s budget request in early February, the House and Senate Budget Committees draft and mark-up budget resolutions, which then go to their respective chamber floors for votes (assuming they make it out of committee markup). If adopted in both chambers, a conference committee is then convened between the two bodies to resolve differences between their budget resolutions. (While this notionally is supposed to take place by April 15, it often takes longer.)

If a joint budget resolution is agreed to, the appropriations committees take up their work on the twelve appropriations subcommittees bills based on the budget resolution’s topline numbers. If a joint budget resolution is not passed, government appropriations are typically funded at roughly the previous years’ appropriations levels, either as an omnibus budget or a hodgepodge of continuing resolutions for the twelve appropriations. For a few years now, our government has been funded by a series of continuing resolutions, the most recent of which funds operations through September 30, 2013 (the end of FY2013).

This lack of progress on negotiating a budget resolution was one of the major topics discussed Tuesday at the Peter G. Peterson Foundation’s annual Fiscal Summit. House Budget Committee chair Paul Ryan (R-WI), ranking member Chris Van Hollen (D-MD) and Senate Budget Committee chair Murray each provided perspectives on why conferencing on the budget is unlikely to happen for 2014—with one of the major reasons being the huge ideological gap between the budgets. Ryan, for instance, noted that the two budgets have very different goals: while the House version gets to budget balance at the end of the ten year window, the Senate version runs a 2.2 percent deficit in 2023.1 Despite Ryan’s insistence that a budget balance in ten years, his FY2013 budget request last year didn’t achieve balance until 2040 (as scored by the CBO (pdf), and based on implausibly high revenue level assumptions that CBO was forced to accept). That budget, in fact, ended the decade with deficits only 1 percentage point lower than the Senate’s 2014 proposal.

Enduring stalemates in the budget process leads to reliance on short-term fixes and last-minute negotiations that predictably result in bad policy outcomes. As Congress continues to choose to create arbitrary fiscal deadlines and manufacture crises around those deadlines (e.g., concerns about the “fiscal cliff” and the lame duck budget deal’s failure to address the economic challenge at hand), the American people are the ones bearing the negative impacts. As Murray stated at the Peterson summit, “by not having a budget today, it means families and businesses have to live with very bad budget policy decisions.” Indeed, instead of the usual deliberative budget process, we are currently stuck with sequestration guiding our fiscal future for the time being—a policy designed to be so awful that Congress was expected to go to the lengths necessary avoid it. Instead it is now the law of the land.

Since Congress does not appear to be heading to conference to hash out a budget resolution for FY2014, what can we expect to happen? Currently, spending levels set forth in the Budget Control Act (the resolution of the manufactured debt limit crisis of 2011, which created and set sequestration as default budget policy) will shape the FY2014 budget. Sequestration directs total discretionary spending in 2014 to be $967 billion, the lowest it has been since 2004. Democrats will be pushing to increase that amount, but with a fight on the debt ceiling looming this summer and fall, we can unfortunately expect another manufactured crisis to get in the way of any attempts to fund government agencies through a reasonable process and at a reasonable level.

1. Ryan also relies on gimmicks to achieve balance; while he repeals the benefits of the Affordable Care Act, he keeps in place new taxes within ACA as well as $715 billion in Medicare savings Ryan decried while on the campaign trail with Mitt Romney.