H.R. 2693: Senator Reid’s “Budget Control Act of 2011”

H.R. 2693

Senator Reid’s “Budget Control Act of 2011”

Date
July 30, 2011 (112th Congress, 1st Session)

Staff Contact
Communications

Floor Situation

On Saturday, July 30, 2011, the House is scheduled to consider, H.R. 2693, Senator Harry Reid’s “Budget Control Act of 2011” under a suspension of the rules.  The bill will be considered as amended by Senator Reid and reflects changes made since the legislation was proposed in the Senate on July 25, 2011. 

Bill Summary

The Reid plan would allow the president to increase the debt limit by $2.4 trillion in two $1.2 trillion tranches and without intervening legislation required from Congress.  Each tranche would be subject to a congressional disapproval resolution, however, the president could veto the resolution and the debt limit would increase if Congress could not override the veto.  According to CBO, the legislation would reduce the deficit by $2.19 trillion over ten years, which includes $1 trillion in phantom savings for war spending which has never been appropriated or requested, and is not expected to be spent.  Even when these theoretical war savings are accounted for, the Reid plan would still increase the debt limit by $206 billion more than the savings the bill produces.  When phantom war savings are excluded, CBO states that the bill would only reduce spending by $927 billion over ten years compared to a debt limit increase of $2.4 trillion. The bill does not provide for the consideration of a Balanced Budget Amendment—much less require its adoption.

The following is a summary of the bill’s highlights based on the amended version posted on the Rules Committee website and the cost estimate prepared by CBO on July 29, 2011.

Discretionary Spending:  According to CBO, the Reid plan would impose discretionary spending caps—excluding war related funding—starting at $1.045 trillion in 2012 and reaching $1.227 trillion in 2021.  CBO estimates that these caps would reduce discretionary outlays by approximately $752 billion over ten years.  The House-passed plan contained a total of $756 billion in discretionary outlay reduction from discretionary caps.

$1 Trillion in Phantom Spending Cuts:  The Reid plan contains more than $1 trillion in imaginary “savings” from war spending that is not written into law, has never been requested, and no one plans to ever spend.  According to CBO, the Reid plan would set caps on spending for the wars in Iraq and Afghanistan over the next ten years, which would have the impact of reducing CBO’s baseline for war spending by $1 trillion over the next ten years—but would actually cut zero dollars of real spending.  According to their estimating practices, CBO automatically assumes that we will continue to spend at least $159 billion annually (the amount spent for 2011) on war operations for the next ten years even though the amount has neither been requested nor written into law.  It is widely known that the cost of the ongoing wars in Iraq and Afghanistan will be significantly reduced in coming years, but CBO’s mandate forces it to assume $1.6 trillion in war spending over the next decade.  By contrast, the budget submitted by President Obama assumes that spending on the wars will total $575 billion over ten years.  Reid’s plan caps war spending at $545 billion—fundamentally the same amount as the president’s budget already estimates—and calls it a savings of $1 trillion.  The Reid plan simply reduces a make-believe war spending baseline that will never be reached, and pockets the “savings” from imaginary outlays to the tune of $1 trillion.  The House Republican Budget Control Act of 2011 would provide real cuts to reduce spending by an amount greater than the debt limit increase without relying on budget gimmicks.

$2.4 Trillion Debt Limit Increase Significantly Larger Than Cuts:  The bill would provide a procedure for raising the debt limit by allowing the President to request an immediate debt limit increase of $1.2 trillion, subject to a congressional resolution of disapproval.  The bill would then provide for an additional $1.2 trillion debt limit increase upon a later request from the president, subject and another congressional disapproval process.  Under the bill, the debt ceiling would be immediately increased by $416 billion upon the first request of the president.  If the congressional disapproval legislation is not enacted, the debt ceiling could be raised by the president to a total amount of $1.2 trillion for the first tranche, and the president would be authorized to raise the debt limit by an additional $1.2 trillion at a later time subject another congressional disapproval resolution.   In total, the president would be authorized to raise the debt limit by $2.4 trillion with no additional legislation from Congress required.

According to CBO, the bill—even if you include the $1 trillion in imaginary war savings—would only reduce spending by $2.194 trillion over ten years, meaning the debt limit increase would be $206 billion beyond even the most generously calculated spending cuts in the bill.  If you exclude phantom war savings, the bill reduces spending by $927 billion according to CBO.

Deficit Committee:  The Reid plan would create a Joint Select Committee on Deficit Reduction with a stated goal of reducing the deficit to 3 percent of GDP—which would occur in 2014 under CBO’s current baseline, regardless of Joint Committee recommendations.  If the Joint Committee does not report a bill by November 23, 2011, then the bill loses its expedited status, and the Joint Committee dissolves on January 13, 2012.  In contrast, the committee established by the House-passed bill is forced to produce savings (the forcing mechanism in the Boehner bill is the fact that the debt limit will need to be increased).

Disaster Spending:  According to CBO, the Reid plan would provide for spending increases for disaster relief that would not be subject to the discretionary spending caps.  However, CBO is unable to estimate the additional cost of added spending because “the bill does not define disaster spending, and therefore CBO could not incorporate this adjustment in its projections of spending.”

Adjustments for Program Integrity:  According to CBO, the bill would provide for adjustments to discretionary spending caps to fund initiatives aimed at reducing overpayments of federal benefits and raising revenue by increasing compliance with tax laws.  The Reid plan would allow discretionary spending increases beyond capped levels for program integrity initiatives regarding the Social Security Administration, health care, Unemployment Insurance, and Internal Revenue Service compliance. 

Payments to Agricultural Producers:  According to CBO, the bill would reduce direct spending by $11.1 billion over ten years by reducing the portion of an agricultural producer’s acreage used to calculate direct payment assistance from 85 percent of the historical planted acreage to 59 percent. 

Pell Grants and Student:  According to CBO, the bill would increase spending by $18 billion for Pell grants by directly appropriating $10.5 billion for fiscal year 2012 and $7.5 billion for fiscal year 2013.  These increases would be offset by eliminating the interest subsidy student loans for graduate students while a borrower is in school.  Because borrowers would be responsible for the interest accrued on those loans while in school, CBO estimates that this provision would reduce direct spending by 18.1 billion over the 2012-2021 period.

Modifications from the Original Reid Bill:   According to CBO, the legislation under consideration contains several changes from the bill introduced by Sen. Reid on July 25, 2011, as follows (from CBO): 

  • Reduces the caps on new discretionary funding in 2020 and 2021 by $1 billion for each of those fiscal years;
  • Contains revised language related to program integrity initiatives aimed at reducing overpayments of certain federal benefits and improving compliance with tax laws;
  • Removes provisions governing spectrum auctions and related spending; and
  • Changes the procedures for increasing the debt limit, substituting a multistep process for the earlier single increase in the debt limit.

Background

According to CBO, H.R. 2693 would reduce the deficit by $2.194 trillion over ten years—including $1 trillion in war funding gimmicks—and increase the debt limit by $2.4 trillion.