Budget Conference Moves Forward

Negotiators for the House of Representatives and the Senate are expected to announce a deal on the budget resolution as early as today. A budget resolution sets overall spending limits for the year. If it passes, it would be the first resolution in six years, but it does little to fix the country’s long-term fiscal mess.

The original House and Senate budget proposals left much to be desired. Each proposal increased defense spending by using the Overseas Contingency Operations (OCO) account as a slush fund. This maneuver allowed each chamber to claim allegiance to the 2011 Budget Control Act spending caps, while bypassing it to boost spending.  The House budget included a version of Medicare reform, but delayed its start date until 2024. The Senate left Medicare reform off the table.

This week, budget negotiators seem to be taking disappointing parts from each chamber.

Defense Spending. Both chambers would provide $96 billion in OCO spending for fiscal 2016, up from $74 billion in fiscal 2015. But the Senate’s version makes it a little tougher to increase spending with the addition of a parliamentary point of order. Under this provision, 60 senators would have to take an affirmative vote to increase defense spending, to the higher OCO levels, without offsetting spending cuts. The Senate has more than 60 senators who would probably waive the point of order, but it would still be a modest added check on defense spending. Unfortunately, the negotiated deal removes the point of order for fiscal year 2016.

Medicare Reform. The joint budget resolution will follow the Senate’s lead and remove the House plan to reform Medicare. Medicare reform has been a mainstay of House budgets since 2011 when Republicans regained control of the chamber. Eliminating plans to reform Medicare sends a strong signal that Republicans are not serious about confronting entitlement issues.   

Balancing the Budget. The budget resolution would balance the federal budget within ten years, which would be a good goal, but nothing in the resolution would force Congress to follow through in the future. Recent actions signal that Republicans are not interested in real budget restraint. Congress repealed Medicare’s “doc fix” in April. The change increased the deficit by $141 billion over the next decade. The new House-Senate budget resolution includes $141 billion in cuts to offset the “doc fix,” but Congress will still need to repass the measures for the deficit reduction to occur. Congress should have paid for the “doc fix” in the original bill, not in the budget resolution.

Each chamber will likely approve the joint resolution this week and then switch focus to the appropriations process. Given Congress’ desire to boost defense spending and the White House’s desire to boost other discretionary spending, a summer deal increasing all types of spending seems likely.