No matter the outcome of the upcoming mid-term elections there is an important policy issue that will take center stage early in the coming 116th Congress. Its an issue that everyone knows Congress must begin to address and its an issue that could impact everyone’s favorite federal program — the federal debt and growing federal deficits.
Three factors are going to drive Congress to take action:
1. The creation of, and coming report from (due at the end of November) the Joint Select Committee on Budget and Appropriations Process Reform,
2. Recently released U.S. budget projections by the Office of Management and Budget (OMB) and the Congressional Budget Office (CBO). In their (July 2018) Mid-Session Review OMB said the U.S. deficit will reach $890 billion, while CBO’s (June 2018) Long Term Budget Outlook projected the deficit at $793 billion. Despite CBO projecting “the economy grow(ing) relatively quickly this year and next and then more slowly in the following several years. The federal budget deficit rises substantially..” Both budget watchdogs project deficits for FY 2019 reaching $973 billion (CBO), and $1.085 trillion (OMB). The For 2020, CBO said $1.003 trillion compared to OMB’s $1.076 trillion.
3. Congress must again reconsider the U.S. debt limit before March 1, 2019.
In the Bipartisan Budget Act of 2018, which was signed into law on February 9, 2018, Congress created “The Joint Select Committee on Budget and Appropriations Process Reform.” This select committee is made up of 16 bipartisan members of Congress, equally divided between the House and Senate. The committee is tasked with considering options and providing recommendations to Congress on reforms to the current budgeting and appropriations processes.
Since April the select committee has been holding public hearings and receiving testimony from budget experts, both on & off Capitol Hill. The committee is required to report recommendations and legislative text by November 30, 2018. To review the list of appointed committee members, click here.
Numerous proposals have surfaced during committee deliberations but the ideas that appear to be gaining majority consensus include;
- Moving to a biennial budget. This would include splitting the total 12 annual appropriations bills in half, adopting 6 appropriations bills in year 1 of the session and the remaining 6 appropriations bills in year 2 of the session. According to the National Conference of State Legislatures (NCSL) 15 states legislatures meet annually but adopt their respective state’s budget biennially. 31 states legislatures meet annually and pass a budget annually. States with biennial budgets contend it is difficult to project revenues and time consuming for executive branch departments to chart spending over a two-year period.
- Change the federal budget year to a calendar year. Some lawmakers believe this will give them more time to work on appropriations bills.
- Grant the House and Senate Budget Committees authority to set binding and enforceable deficit reduction targets.
Congress Has Little Choice But to Act
While no one is certain yet what budget reforms will be enacted one thing is certain; Congress has little choice but to act on reducing U.S. debt and deficits. In mid-July the Office of Management and Budget (OMB) released their Mid-Session Review that provides an update to the President’s FY 2019 budget released in February. According to OMB economic projections the U.S. deficit would reach nearly $1.1 trillion next year. This is a deterioration in the projected deficit in 2019 that is twice as large as the projection offered just one year ago in 2018. Over the 10-year period 2019-2028 the deficit is reduced by only $500 billion.
Over the same 10-year period the debt held by the public ($15.7 Trillion) as a share of the economy only improves by -2%, from 77% of Gross Domestic Product (GDP) to 75% GDP. The latest Mid-Session Review highlights the significant deterioration of the U.S. fiscal situation.
The Congressional Budget Office (CBO) released their Long Term Budget Outlook on June 26, 2018. CBO said that despite “the economy grow(ing) relatively quickly this year and next and then more slowly in the following several years..if current laws remain generally unchanged, federal budget deficits and debt would increase over the next 30 years—reaching the highest level of debt relative to GDP in the nation’s history by far.”
In addition, the Bipartisan Budget Act of 2018 also suspended the U.S.’ limit on its ability to borrow money (known as the debt limit) through March 1, 2019. A decision on extending the $20.456 trillion debt limit will be among the first big decisions that the new 116th Congress must make before March 1, 2019.
Is Your Organization Ready For a Constricting U.S. Budget?
Changes to the U.S. budget process like those being proposed can cause dramatic shifts in the timing and amounts available to federal programs important to your business or organization. Is your business or organization ready for these changes?
Congressional actions to curtail federal spending can include cuts to non-defense discretionary funding that totals about $600 billion each year for all U.S. government programs. Non-defense programs are domestic and international programs outside of national defense that Congress funds on an annual basis. Broad program areas that could be targeted for reductions include, but are not limited to:
- Health care,
- Transportation and economic development programs,
- Education and training programs,
- Law enforcement, criminal justice, and correctional activities, and
- Science, environment, and energy programs.
- Environmental Protection Agency’s Drinking Water State Revolving Fund (DWSRF) and Water Infrastructure Finance and Innovation Act (WIFIA),
- assistance to states and local governments for prevention and prosecution of domestic violence, drug trafficking & other crimes,
- several federal biological programs impacting agriculture pest & disease, health care, & animal and human drug approvals,
- Agriculture & National Institute of Health research,
- food regulations,
- energy technologies that enable American energy independence and domestic job-growth, and
- transportation and infrastructure projects.
The select committee has until November 30 to adopt any agreed upon provisions. If the select committee reports a bill, the US Senate would have to quickly consider it under special considerations but a cloture motion requiring 60-votes must be achieved. In the House of Representatives the measure would be considered under rules established by House leadership.