by Alex M. Parker

April 25, 2011

Debate over the debt ceiling and the 2012 budget will dominate the discussion

Everyone in the federal government can finally relax. The government would remain open, after Congress easily passed a bill to keep federal funds flowing until the end of the fiscal year on September 30. But the final deal between the White House and Republicans has left many conservative activists feeling cheated and eager to mount a more spirited fight during the next deficit showdown.

And that showdown could be coming soon.

According to the Treasury Department, government spending will bump up against the federal debt limit by May 16. A vote may not be necessary then, because the federal government can find ways to avoid exceeding the $14.3 trillion limit for a few months. But sometime this summer, legislative action will be necessary to prevent the government from going into default and plunging the U.S. economyinto turmoil. Republicans say they will vote to increase the limit, but only if the legislation includes some measures to reduce the deficit.

The deficit is fast becoming the center of the debate. Likely, the battleground will largely be over Medicare and tax cuts, two of the most politically sensitive topics in Washington. In a speech on his deficit-reduction plan, President Obama spent as much time attacking Republican plans as he did promoting his own proposals. In particular, Obama aimed his ire at the proposal from Wisconsin Republican Rep. Paul Ryan to convert Medicare into a premium-support payment system, where seniors would get vouchers to use on the private market. "I will not allow Medicare to become a voucher program that leaves seniors at the mercy of the insurance industry, with a shrinking benefit to pay for rising costs," Obama said. He added that his plan would cut the deficit by $4 trillion over the next 12 years, which is a little bit less than Ryan's proposal. Obama also claimed his plan would do more to reduce healthcare costs by beefing up an independent commission to examine ways to cut down on waste in Medicare, and by using Medicare's purchasing power to negotiate better drug prices. In addition, Obama promised tax reform--including allowing the Bush-era tax cuts for top earners to expire--and waste reduction in the Department of Defense. Obama's plan also calls for cuts to agricultural subsidies and discretionary spending.

Obama's speech wasn't heavy on specifics, but it did provide a rallying call for Democrats eager to see the president stand up for their values. It also helped rally conservatives against the move to raise taxes. As with the fight over the 2011 budget, the debates over the debt ceiling and 2012 budget will likely involve intense negotiations and partisan attack rhetoric. The first skirmish came on Friday, as the House voted on several competing 2012 budget proposals, ultimately passing Ryan's deficit reduction plan 235 to 193. The plan has little hope in the Democrat controlled Senate, but it is likely to play a huge part of the ongoing deficit discussion.

This upcoming fight may be all the more heightened due to disappointments from activists on both sides about how the 2011 budget battle ended. Many conservatives were irked that the cuts in the bill didn't go deeper--especially after the Congressional Budget Office reported that the actual savings could be less than the $38 billion in cuts the White House originally announced. The CBO notes that, in terms of money actually spent, the new budget would only cut $352 million in fiscal year 2011, as the remaining cuts will be spread out by agencies over the next 10 years. Even then, the CBO estimated that the budget would only reduce the amount of money actually spent by $20 to $25 billion during that time. The other money cut, the CBO believes, likely wasn't going to be spent anyway.

Republicans argue that to look at those figures--called outlays, in budget parlance--is misleading. House Speaker John Boehner asserted that, by setting a lower baseline for spending, the budget will cut $315 billion from the deficit over the next 10 years. Decisions about outlays for long-term projects are often determined by Congress years, or even decades, before. "People are being overly dramatic about this," one House staffer says. "We didn't try to hide anything." But if a conservative backlash was brewing against the bill, it didn't have enough time to derail its passage in the House. The GOP leadership in the House ultimately needed Democratic support for the bill to pass since 59 Republicans voted against it. It passed the House with a 260-167 vote, and the Senate by an 81-19 vote.

The deal didn't necessarily keep liberals happy either. Many top House Democrats also voted against the bill, though it ended up receiving 81 Democratic votes in the House. Following the president's lead, Democrats will likely fight to include more defense cuts in future deals, after the 2011 budget bill increased Pentagon spending by $5 billion, while cutting most other departments. The deal also included cuts to community block grants for low-income housing, as well as selective cost-cutting reforms to Pell Grants, two programs beloved by Democrats. The budget also slashes spending for the Environmental Protection Agency , although not nearly as deeply, or with the same restrictions, that House Republicans originally advocated. Still, as details about the budget bill trickled out, many Democrats heaved a sigh of relief. "They significantly reduced the pain, and in effect made it a smaller package," says Scott Lilly, a budget analyst with the left-leaning Center for American Progress and former Democratic congressional staffer.

Disillusioned conservative activists are hoping the next round of budget fights will result in more cost savings, as well as a vigorous debate about the role of the federal government. "I think the real test is going to be what happens over the next six months," says Mark Meckler, cofounder of Tea Party Patriots, one of the key groups involved in the Tea Party movement. "Politics is interesting, because folks always have the chance to do the right thing, over and over again." Because the debate will swirl around the country's long-term fiscal situation, rather than annual spending, it's more likely to include farther-reaching deficit reforms than the debate over the 2011 budget. Tad DeHaven, a budget analyst with the libertarian Cato Institute, said he hoped the future discussion could center on the size and scope of government, something he didn't see during the last budget debate. "I just don't see any ideological underpinning to what they're trying to do," DeHaven says. "They're not talking about the scope of federal activities."

The legislative wrangling over the 2011 budget proved fierce, but it was likely only a warm-up for the deeper fiscal debates on the horizon.

 

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