Congress Passes Budget for FY 2018 with Large Reductions in Non-Defense Programs -- Or Did They?

Congress Passes Budget for FY 2018 with Large Reductions in Non-Defense Programs -- Or Did They? — On Thursday, October 26, the House of Representatives agreed with a FY18 budget plan (H.Con.Res.71) developed and passed in the Senate earlier this month.  This budget – which is the FY 2018 Congressional Budget Resolution -- calls for $1.1 trillion in spending in FY 2018.  The plan includes billions of increases in defense spending, cuts to non-defense spending, and billions in mandatory spending cuts over a decade.  The budget resolution also provides instructions to the House and Senate tax writing committees to develop a tax reform bill that overhauls the tax code using a process known as reconciliation which requires only a simple majority in the Senate for passage.

The spending estimates in the budget resolution – the increase for defense and the dramatic reductions suggested for non-defense programs – are in line with the budget plan the Administration submitted to the Congress back in the spring.  The Administration’s proposed draconian reductions to non-defense spending – an estimated $54 billion or 10% decrease from FY 2017 to FY 2018 – when unveiled last spring was met with public comments of condemnation and opposition by many Republicans and Democrats.  Some senior Republicans on the House Appropriations Committee were quoted as saying that the President proposes, and the Congress disposes.  And that proposed reductions – such as the proposed termination of the Sea Grant Program, the 10% cut to the National Science Foundation, and the 20% reduction for the National Institutes of Health – were unlikely to happen.  Yet, this week the press reported the House and Senate passed a budget that called for dramatic reductions in non-defense programs and equally large increases for defense programs.  

Wait – what?  Confused?  What happened and what does this mean?

What the Congress passed was a budget resolution, in effect a non-binding spending plan for FY 2018 that offers suggestions to Congressional appropriators.  As much as the budget resolution may suggest spending adjustments, it does not amend the spending caps contained in the law called the Budget Control Act (BCA) and does not determine the spending level for individual agencies and programs. In addition, the budget resolution calls for a reduction in mandatory spending (i.e. social security and Medicaid).  Some Members of Congress estimate that the budget resolution anticipates cutting almost $2 trillion alone from Medicare and Medicaid.  But without the enactment into law of specific legislation that actually makes these reductions in mandatory safety net programs, the budget resolution spending adjustments should be viewed as advisory or as a suggestion.  

The budget resolution, prominently reported by the press this week, does not appropriate any money, it doesn’t change the spending caps under which the Appropriations Committees operate, it doesn’t amend social security or Medicaid legislation or make the draconian cuts in non-defense discretionary programs envisioned in the budget resolution. All of those issues may or may not be addressed in subsequent legislation (appropriations, tax bills, amendments to the BCA, etc.)

What the budget resolution represents is Congress’ first step towards a tax reform bill that is a key priority of the Administration and many in the Congress.  The House leadership is pushing for legislation that would overhaul the current tax code by Thanksgiving with the hope it can be enacted into law by the end of the calendar year. Overhauling the tax code that provides tax breaks to some, eliminates tax deductions for others, and changes the tax brackets for yet others, is controversial and extremely difficult to do when one has all the time in the world.  To accomplish this within the remaining two months of this year would be one of the heavy lifts of all time.  

Tax reform is not the only major decision Congress wants to address by the end of this year.  So too does the Congress and Administration have to decide what to do about current federal spending for NSF, NOAA, the Defense Department, the FBI, the Department of Homeland Security, the Federal Aviation Administration, NASA, USGS, the National Park Service, etc. when the current Continuing Resolution expires on December 8.  For months – since the spring when the President submitted a controversial FY 2018 budget request – pundits have suggested the Congress will reject the President’s budget request (particularly its $54 billion reduction in non-defense discretionary spending) and instead raise the statutory spending caps for both defense discretionary spending and non-defense discretionary spending and restore funding to many of the popular programs the President proposed to terminate or severely reduce.  

The current deadline for acting on these spending cap adjustments and the completion of the FY 2018 appropriations process for the fiscal year that is already one month old, coincides with the target date for completion of tax reform.  Reports indicate that quiet, behind the scenes, discussions about raising the spending caps for both defense and non-defense discretionary activities for FY 2018 are proceeding cognizant of the December expiration of the current continuing resolution.  

When one adds in the additional emergency billions in spending Congress is expected to pass in response to the major hurricanes we experienced this year, decisions on DACA and other major public policy issues, it is clear that Congress and the White House have many major, controversial, and far reaching decisions to make in a relatively short period of time.

Stay tuned as the next two months in Congress will be as busy as working in a liquor store at Christmas time.