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Federal update: Congress back in session

May 18, 2011
Lori Clark

Lori Clark

Congress came back in session last week after several weeks of spring recess.

The two main agenda items they have been dealing with are the issue of raising the debt ceiling and the FY2012 budget.

I previously reported that the U.S. government will reach the limits of its authority to borrow any additional funds this month. However, Treasury Secretary Timothy Geithner has indicated that because of higher-than-expected tax revenues, the federal government should be able to keep paying its bills without a debt ceiling increase until Aug. 2.

Because Treasury securities set the benchmark interest rate for a wide range of credit products, including mortgages, car loans, student loans, credit cards, business loans and municipal bonds, any default on debt repayments by the federal government could result in a dramatic increase in interest rates and lead to global financial instability.

Congressional Republicans have indicated that any agreement to raise the debt ceiling must be accompanied by major spending cuts. They also have indicated that they are looking to reform Medicare and Medicaid, institute budget reforms and find spending cuts to completely offset the debt-limit increase.

It appears as though the Congressional Republicans will not allow any major rewrite of the tax code to be a part of the debt ceiling increase negotiations.

The Democrats were pushing to allow the Bush-era tax cuts for wealthy Americans to expire and seeking to end the existing tax breaks worth billions of dollars to oil companies. Republicans view these two actions as a tax increase. These negotiations will undoubtedly continue to be at the forefront of Congressional and Obama administration discussions until a compromise is reached.

Everyone does seem to agree that the debt ceiling must be increased before the federal government is forced to default on any debt repayment.

On the FY 2012 budget, House Speaker John Boehner has set a goal of getting all 12 appropriations bills passed before the August recess.

The 12 House Appropriations Subcommittees have been given their spending ceilings, and they are currently beginning the process of conducting hearings on how the funds would be allocated among the various accounts in the federal agencies under their jurisdiction. Defense would get a 3 percent increase, and it is the only one of the 12 House appropriations bills that would be spared any cuts.

The military would get 52 percent of all discretionary spending, meaning the eight entirely domestic spending bills would have to absorb a collective 10 percent cut to achieve the $30 billion in reductions the House is aiming for; this number is likely to rise because it is unlikely that any compromise on the debt ceiling increase will be agreed to by the Republicans without additional spending cuts.

There are rumors that House Appropriations Chair Hal Rogers will wait until after the debt ceiling issue is resolved  to bring out three bills that propose deep cuts. Those bills include foreign aid (with a proposed 18 percent reduction in funding over this year’s level), transportation and housing (a 14 percent reduction), and labor, health and education (a 12 percent reduction). Holding these bills would give the House Republicans additional leverage in the larger federal budget negotiations involving the debt ceiling and deficit reduction.

The Senate has had problems in passing any appropriations bills in recent years. If the deficit reduction talks require greater spending cuts than the $30 billion the House is now targeting, then the entire appropriations process could be forced to start at Square One after Labor Day.

In other news, President Obama did call on Congress last week to send him legislation this year creating a path toward citizenship for the 4 percent of the population that is in the United States illegally. There has been revived talked about a new DREAM Act; however, it is unlikely that any legislation on this topic would be passed before the 2012 elections.

The Voices section of NIU Today features opinions and perspectives from across campus. Lori Clark is director of federal relations for NIU.