October 18, 2005

• House Leaders Begin to Settle in for Spending Cuts Through the Budget Reconciliation Process, Reductions in FY 2006 Appropriations, and Budget Rescissions

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House Leaders Begin to Settle in for Spending Cuts Through the Budget Reconciliation Process, Reductions in FY 2006 Appropriations, and Budget Rescissions

House Republican leaders have moved from a position of opposition to enacting large spending reductions in entitlement programs through the reconciliation process, e.g., Medicaid, and other programs, and in programs funded through annual appropriations through budget rescissions, e.g., reducing current spending and reducing appropriations from FY 2005 levels for FY 2006, to proposing them.

For student financial aid, this means that all of the Title IV student financial aid programs may be on the table for budget/appropriations reductions.

The conservative wing of the party has been pushing proposals totaling up to $370 billion in savings over five years in already enacted appropriations, and the leadership in the House is beginning to embrace this approach to offset increased spending for the wars in Iraq and Afghanistan and natural disaster reconstruction, after initially opposing the approach.

As the Congress reconvenes after its Columbus Day and Yom Kipper recess, the House Republicans are taking steps to cut as much as $50 billion from the fiscal 2006 budget from entitlement programs. It is also considering across-the-board cuts in other programs.

House leaders are currently in the process of drafting final changes to its budget resolution-originally passes in March-to include further across the board spending reductions in non-defense-related programs, repeal all programs not scheduled to receive FY 2006 appropriations, and increase the original budget reconciliation savings target from $34.7 billion to $50 billion over five years.

So, the Senate leadership is sticking with its $34.7 billion reconciliation target and not pursuing any further savings measures.

Just last month, then-House Majority Leader Tom DeLay (R-TX) responded to Republican demands for budget cuts to pay for the soaring cost of hurricane relief by stating that eleven years of Republican rule had pared down the federal budget "pretty good."

Faced with a revolt among many conservatives sharply critical of him for resisting spending cuts, last month, DeLay told the House Republican Caucus that he misspoke and will now consider spending reductions through rescissions and increasing the budget reconciliation target.

The abrupt shift was partly caused by the Majority Leader's indictment in Texas which forced him to relinquish power and allow the House fiscal conservatives — known as the Republican Study Committee, or RSC — to gain the upper hand.

Now, cutting the budget — which only months ago seemed far from possible — is at the center of the agenda in the House.

The RSC began a public crusade for spending cuts last month, with its leaders using news conferences, television appearances and media interviews to promote its report, "OPERATION OFFSET" (http://johnshadegg.house.gov/rsc) which identified potential targets for spending cuts that, if enacted, would save an estimated $370 billion over a five year period. The RSC also took these opportunities to attack the current Republican leadership for its continued deficit spending.

A Texas grand jury's September 28th indictment of Tom DeLay changed the balance of power, forcing the leadership to shore up its conservative base and raising the prospect of a new leadership election that would further undermine GOP unity entering an uncertain election season.

A revolt has been stirring among the House Republicans for months. Fiscal conservatives opposed the expansion of President Bush's No Child Left Behind Act, opposed the Medicare prescription drug benefit, and opposed the $250 billion transportation bill that passed this summer with a record-shattering number of pork-barrel projects.

They are also concerned that, since 2001, federal spending has grown by a third, from $1.86 trillion to $2.47 trillion, while record budget surpluses turned to record deficits. Conservative activists, led by talk show hosts and opinion columnists, have begun pressing Republicans hard on what they saw as Big Government Conservatism.

Then, in the aftermath of the devastation caused by, first hurricane Katrina and, then, hurricane Rita, lawmakers rushed back to Washington, to express their concern for the victims after the Administration was widely criticized for its tardy response.

A planned conservative agenda of tax cutting, a permanent end to the estate tax, and the first cuts in Medicaid and other entitlement programs in nearly a decade appeared lost.

Some Republicans were even suggesting it might be time to raise taxes, joining a chorus of Democrats and moderate Republicans, pressing to roll back some of Bush's tax cuts, as an alternative to reducing spending for popular programs.

As of today, Congress has enacted $70.2 billion in hurricane relief, without identifying from whence the money will come.

The RSC had sponsored an amendment to enact a one time, across the board, three percent spending reduction in federal programs — other than defense, homeland security, and veterans affairs — funded through annual discretionary appropriations to pay for the hurricane relief efforts. But House leaders rejected the amendment and, instead, moved the bills through the House in an expedited manner prohibiting any debate or amendments.

To compound the conservatives' growing concern, its unveiling on September 14th of the Operation Offset report was met with ridicule by the House Majority Leader with his response of "Sure bring me the offsets, I will be glad to do it, but no one has been able to come up with any yet".

The RSC leadership was later reprimanded for criticizing the Republican led congress and reminded that the annual deficit estimate had recently been reduced by $100 billion.

These mid September events caused continued discussion among Members and in the media. Continued spending on the war on terror and on the most recent natural disasters funded through increased federal borrowing and continued spending reductions in popular domestic programs had the potential of impacting the 2006 mid term elections.

Then in late September Majority Leader Delay was indicted and forced, under the Rules of the House of Representatives, to relinquish his Majority Leader's position. And, the RSC saw its opening to mount a strong advocacy for its positions outline in Operation Offset.

On October 6th, the Speaker of the House announced that the House's budget reconciliation target for 2006 had been raised from $35 billion to $50 billion, and, House committee chairs were instructed to find additional savings through the FY 2006 appropriations bills and FY 2005 appropriated amounts in domestic entitlement and discretionary programs, e.g., Medicaid, Medicare, food stamps, education, farm supports, student loans, etc.

Look for a lot of scrambling for the remainder of this calendar year as conservative Members and their staffs try to accommodate an awful lot of spending needs and reducing income taxes without the appearance of raising new revenues, and Democrat and moderate Republicans fight to maintain current spending levels.

To find out the name of your representative in Congress, go to www.capitol.state.tx.us/fyi/fyi.htm.

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