Politics & Policy

Halftime to Endgame

Congress is making surprisingly good progress on the budget

When lawmakers left Washington in late July, it felt like a good midway point for the year, with plenty of time left over for legislative soup-making. But they soon discover September feels like a frenetic Last Supper: a congressional food fight with looming budget deadlines and not enough time in the day to digest the super-sized menu.

Instead of easing back, Congress’s schedule heats up like a pressure cooker. “It’s one of the strangest transformations in politics, but it happens every year,” a former senior White House official told me. “Everyone leaves here in July thinking we’re at a nice halfway point. And then they come back after Labor Day, and it’s all about the endgame of wrapping up the year.”

With September 30 looming as the end of the fiscal year, lawmakers face a frenzied few weeks–”like stuffing ten pounds of cow manure in a five-pound bag,” one veteran House member likes to say. What goes in the sack has major implications for a host of spending, tax, and other public-policy issues–and for the Republican party’s reputation as a governing majority. These next few weeks could determine if congressional Republicans successfully slow spending growth, pass further pro-growth tax cuts, and generally comport themselves as a competent, conservative governing majority–or if the GOP gets mugged by a combination of its own internal divisions and clever Democrat tactics.

Completing the annual appropriations bills, including quick action on a hurricane-relief package, is job one. The FY ‘06 budget authorizes $843 billion in discretionary programs funded through 12 separate appropriations bills–a 2.1-percent increase over FY ‘05, but a 0.8 percent decrease (minus Defense and Homeland Security).

Overall spending, however, is likely to balloon once Congress puts together supplemental-spending legislation for Hurricane Katrina victims. The first installment of such federal relief should be moving by the weekend–the Senate voted Thursday night and the House plans to Friday. Despite the obvious humanitarian need for help, many on Capitol Hill also believe quick action is required as an investment to mitigate the enormous ripple effects this regional calamity could have on the national economy. While the overall price tag is still uncertain, budget experts are optimistic continued economic growth and the one-time nature of this relief package will keep Republican deficit-reduction efforts on track.

At the same time, Congress is moving at Mach speed processing its yearly funding measures. The House, owing to its new, streamlined appropriations-subcommittee structure (GOP leaders reorganized the jurisdiction, and number, of appropriations subcommittees earlier this year) and the leadership of its first-year chairman Jerry Lewis, did something it hasn’t done in nearly two decades: pass all its appropriations bills through the House before the July 4 recess. Even the normally slower Senate made significant progress before its August recess. Two of the 12 appropriations bills are already signed into law. Three more passed the Senate with another six ready for floor consideration (only the Defense appropriations bill has not seen any Senate action yet).

Mandatory-spending reforms (e.g., entitlement programs like Medicaid) are also on tap. The FY ‘06 budget calls for slowing growth by $34.7 billion over five years. The budget instructs congressional authorizing committees to change mandatory-spending programs by September 16 for Medicaid, student loans, and farm programs, as well as raise revenues from new spectrum fees and royalties generated by opening up the Arctic National Wildlife Reserve to energy development. Expect Democratic howls over the impact of these “cuts.” Hardly Draconian, the $35-billion-odd in savings only slows the growth rate by 0.1 percent. Instead of increasing by 5.7 percent between 2004 and 2010, these programs will increase by 5.6 percent.

When it comes to tax policy, the congressional truism that “process drives policy” holds true. Ways and Means Committee chairman Bill Thomas insisted earlier this year that the budget tax-cut number remains relatively low–a disconcerting position to some pro-growth advocates at the time. The compromise level called for $70 billion in net tax cuts over five years, but Thomas initially wanted an even smaller figure.

Because the budget rules protect this $70 billion from filibusters, the Senate can pass this tax-cut bill with only 51 votes. Tax writers will likely load up this measure generated through the so-called budget-reconciliation process with more controversial items, (controversial at least in the minds of Senate liberals) like extending the 15-percent rate on dividends and capitals gains from 2008 to 2010. Other items more difficult for Democrats to vote against in the Senate, like extending popular tax incentives set to expire, (like the R&D tax credit and the welfare-to-work credit) will get included in a second tax bill later this year.

Add to these items a debate in the Senate about permanently repealing the death tax–slated as the first vote back next week–and a host of tax provisions on retirement savings and long-term care the House is expected to include in its version of Social Security reform, and it adds up to overtime for the congressional tax writers.

Compress all that into a few frantic weeks, add a garnish of immigration reform, and gobbling down the second-half legislative menu could cause congressional indigestion. Lawmakers may want to graze and add some new items to the agenda buffet, but their plates are already overflowing.

Gary Andres is vice chairman of research and policy at the Dutko Group Companies and a frequent NRO contributor.

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