A User's Guide To The Budget Battles

Budget battles involving Republicans, Democrats and President Obama have become so frequent that they may sound like one big shouting match. But there actually are three separate budget debates going on simultaneously.

In the end, they are all about the same thing: How much money should government take in and spend? But the three debates involve different time horizons, and each problem has to be solved in a different way.

Here are the three big budget battles:


The Fiscal 2012 Budget

Background

Each year, Congress is supposed to pass a budget resolution and a dozen spending bills to create an operating budget to fund the federal government. The first day of the government's fiscal year is always Oct. 1.

But time and again, Congress misses that deadline and is forced to pass temporary spending resolutions until it can resolve disagreements. The Oct. 1 deadline is approaching again, and, as usual, the annual budget process is breaking down.

The President's Budget Proposal

The kickoff came in February when President Obama offered his $3.7 trillion budget blueprint. He projected a federal deficit of more than $1 trillion for the new fiscal year. House Budget Committee Chairman Paul Ryan (R-WI) immediately declared the White House plan dead on arrival. "The president's budget accelerates our country down the path to bankruptcy," Ryan said.

The House's Budget Blueprint

In April, the Republican-led House took the next step by adopting a 2012 budget plan. The blueprint, whose chief architect was Ryan, won no Democratic votes. It set out to dramatically cut spending growth in fiscal 2012, and also to fundamentally alter Medicare and Medicaid.

Appropriations & Reconciliation

Since passage of the Ryan budget resolution three months ago, the House has been working on passing the appropriations bills needed to enact it. So far, only four of the 12 appropriations bills have been passed by the House.

But to have an operating budget in effect on Oct. 1, both the House and Senate have to pass identical appropriations bills, and Obama must sign them all into law.

Current Status

On the Senate side, the process has almost completely broken down. The Democratic-led Senate defeated the Ryan budget in May, but has not passed its own overall budget blueprint, nor passed even one appropriations bill.

Senate Democrats say they are waiting to see how the negotiations turn out over the debt ceiling. That leads into the second big budget battle.


The Debt-Ceiling Debate

Background

Time and again, Congress sets a ceiling for how much money the U.S. Treasury can borrow. And time and again, the amount of borrowed dollars needed by Uncle Sam exceeds the ceiling. Usually when this happens, there is grumbling in Congress, but then the lawmakers raise the debt ceiling. Relatively few Americans even notice when this happens.

The Current Debate

This year, however, Republicans are refusing to vote for a ceiling increase until Democrats agree to massive spending cuts that would play out over the coming decade. The U.S. Treasury says it will run out of money to pay all bills on time by Aug. 2 — unless Congress raises the current $14.3 trillion borrowing cap.

The Debt Ceiling And The Federal Budget

In recent days, Obama has been meeting at the White House with leaders of both the House and Senate, trying to work out a multitrillion-dollar debt-reduction package.

This debt-ceiling negotiation process is unusual. It is not part of the typical, annual budget process that plays out each year in the run-up to Oct. 1. But if these extraordinary negotiations were to produce a grand strategy for debt reduction, then Congress would have an overarching plan for shaping the annual budgets over the coming decade.

Could a future Congress toss out everything that might get decided this month by Obama and the current congressional leaders? Yes.

New lawmakers and a new president could do whatever they want. But that would not be likely because no Congress would be eager to reopen old battles. For example, if this Congress were to eliminate controversial tax breaks for corporate jets, it would be politically difficult for the next Congress to resurrect them.


The Social Security Debate

Background

The Social Security and Medicare Boards of Trustees recently said the two programs for the elderly are running into trouble sooner than expected. Medicare's Hospital Insurance Fund is now projected to exhaust its funds in 2024, and Social Security will be exhausted in 2036.

The funds won't go totally bankrupt by those "exhausted" years, but the programs will no longer be able to pay full benefits. Social Security would pay out roughly 75 percent of benefits through 2085, and Medicare 90 percent in 2024.

Entitlements And The Debt Ceiling

In recent days, news stories have floated the idea that Obama and congressional leaders might go even further than trying to reduce the national debt over the coming decade. In this scenario, they would look at big changes to Social Security and Medicare — changes that would have an impact over many decades.

House Minority Leader Nancy Pelosi (D-CA) quickly threw cold water on that idea, saying: "No way. No how. Not now. Not on my watch. No cuts to Medicare and Social Security." Republicans likewise said no to doing a grand deal involving Social Security because they objected to having any sort of tax increases involved.

If Not Now, When?

Many Capitol Hill insiders believe Social Security and Medicare are such sensitive issues that no significant changes can be made to those programs until after the 2012 elections. If Obama were to be re-elected next year, he would take up Social Security reform in 2013, under this scenario.

Budget battles involving Republicans, Democrats and President Obama have become so frequent that they may sound like one big shouting match. But there actually are three separate budget debates going on simultaneously.

In the end, they are all about the same thing: How much money should government take in and spend? But the three debates involve different time horizons, and each problem has to be solved in a different way.

Here are the three big budget battles:

  • The Fiscal 2012 Budget
    short-term
  • The Debt-Ceiling Debate
    medium-term
  • The Social Security Debate
    long-term

The Fiscal 2012 Budget

Background

Each year, Congress is supposed to pass a budget resolution and a dozen spending bills to create an operating budget to fund the federal government. The first day of the government's fiscal year is always Oct. 1.

But time and again, Congress misses that deadline and is forced to pass temporary spending resolutions until it can resolve disagreements. The Oct. 1 deadline is approaching again, and, as usual, the annual budget process is breaking down.

Graph of competing budget proposals

The President's Budget Proposal

The kickoff came in February when President Obama offered his $3.7 trillion budget blueprint. He projected a federal deficit of more than $1 trillion for the new fiscal year. House Budget Committee Chairman Paul Ryan (R-WI) immediately declared the White House plan dead on arrival. "The president's budget accelerates our country down the path to bankruptcy," Ryan said.

The House's Budget Blueprint

In April, the Republican-led House took the next step by adopting a 2012 budget plan. The blueprint, whose chief architect was Ryan, won no Democratic votes. It set out to dramatically cut spending growth in fiscal 2012, and also to fundamentally alter Medicare and Medicaid.

Appropriations & Reconciliation

Since passage of the Ryan budget resolution three months ago, the House has been working on passing the appropriations bills needed to enact it. So far, only four of the 12 appropriations bills have been passed by the House.

But to have an operating budget in effect on Oct. 1, both the House and Senate have to pass identical appropriations bills, and Obama must sign them all into law.

Current Status

On the Senate side, the process has almost completely broken down. The Democratic-led Senate defeated the Ryan budget in May, but has not passed its own overall budget blueprint, nor passed even one appropriations bill.

Senate Democrats say they are waiting to see how the negotiations turn out over the debt ceiling. That leads into the second big budget battle.

The Debt-Ceiling Debate

Background

Time and again, Congress sets a ceiling for how much money the U.S. Treasury can borrow. And time and again, the amount of borrowed dollars needed by Uncle Sam exceeds the ceiling. Usually when this happens, there is grumbling in Congress, but then the lawmakers raise the debt ceiling. Relatively few Americans even notice when this happens.

Graph of the national debt, debt ceiling votes, over time

The Current Debate

This year, however, Republicans are refusing to vote for a ceiling increase until Democrats agree to massive spending cuts that would play out over the coming decade. The U.S. Treasury says it will run out of money to pay all bills on time by Aug. 2 — unless Congress raises the current $14.3 trillion borrowing cap.

The Debt Ceiling And The Federal Budget

In recent days, Obama has been meeting at the White House with leaders of both the House and Senate, trying to work out a multitrillion-dollar debt-reduction package.

This debt-ceiling negotiation process is unusual. It is not part of the typical, annual budget process that plays out each year in the run-up to Oct. 1. But if these extraordinary negotiations were to produce a grand strategy for debt reduction, then Congress would have an overarching plan for shaping the annual budgets over the coming decade.

Could a future Congress toss out everything that might get decided this month by Obama and the current congressional leaders? Yes.

New lawmakers and a new president could do whatever they want. But that would not be likely because no Congress would be eager to reopen old battles. For example, if this Congress were to eliminate controversial tax breaks for corporate jets, it would be politically difficult for the next Congress to resurrect them.

The Social Security Debate

Background

The Social Security and Medicare Boards of Trustees recently said the two programs for the elderly are running into trouble sooner than expected. Medicare's Hospital Insurance Fund is now projected to exhaust its funds in 2024, and Social Security will be exhausted in 2036.

Graph of social security, medicare trust funds

The funds won't go totally bankrupt by those "exhausted" years, but the programs will no longer be able to pay full benefits. Social Security would pay out roughly 75 percent of benefits through 2085, and Medicare 90 percent in 2024.

Entitlements And The Debt Ceiling

In recent days, news stories have floated the idea that Obama and congressional leaders might go even further than trying to reduce the national debt over the coming decade. In this scenario, they would look at big changes to Social Security and Medicare — changes that would have an impact over many decades.

House Minority Leader Nancy Pelosi (D-CA) quickly threw cold water on that idea, saying: "No way. No how. Not now. Not on my watch. No cuts to Medicare and Social Security." Republicans likewise said no to doing a grand deal involving Social Security because they objected to having any sort of tax increases involved.

If Not Now, When?

Many Capitol Hill insiders believe Social Security and Medicare are such sensitive issues that no significant changes can be made to those programs until after the 2012 elections. If Obama were to be re-elected next year, he would take up Social Security reform in 2013, under this scenario.

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