Funding next year for city priority programs could fall victim to the new fiscal realities facing Congress and the Bush administration. As things returned to normal last week in Washington after the August recess, the 13 bills that must. fund next year's federal discretionary programs have not been finalized. Only five are ready for House/Senate conference and four of these face serious obstacles. It is highly unlikely that resolution of funding issues will come before October 1, the beginning of the new fiscal year. If this occurs, Congress will have to pass several continuing resolutions to keep the government funded until final agreements are reached.
Both Congress and the administration face significant challenges in developing the 2002 appropriation bills. Future federal revenues are less than anticipated due to a weakening economy, which has resulted in a shrinking federal surplus, while increased funding demands could force dipping into the Social Security Trust Fund. The president and both parties have vowed not to do this.
It is not clear how the president's request to increase defense spending by $18 billion next year will be accommodated. Congress could decide to dip into domestic programs, look to the Social Security Trust Fund, ask the president and the Department of Defense to make oats in non-priority areas of defense spending to offset the increase, or just decide to move forward with deficit spending. There are major national interests ready to support or oppose each of these alternatives
The president has suggested that Congress can accommodate his funding requests by holding down discretionary spending to the budget cap of $661.3 billion, which would not necessitate dipping into the Social Security surplus.
Senate Democratic and Republican leaders met separately with the president early last week and offered very different approaches to addressing the changed fiscal landscape.
Senator Tom Daschle (D- S.D.), Senate majority leader, placed the burden on the president to identify where to make cuts to accommodate his funding increases. He said, "This was the president's budget. It was passed. This is the president's tax cut. It was passed. It ought to be the president's solution now that those two items have passed." In general, Democratic rhetoric attacks Bush's increased budget request as a threat to the Social Security Trust Fund.
Republicans are pushing a new stimulus package including expanded trade promotion authority for the president, passage of a bill to make the Bush 10-year tax cut permanent and a reduction in the capital gains tax from 20 to 15 percent.
Senator Trent Lott (R- Miss.), Senate minority leader, highlighted the capital gains cut in his meeting with Bush last week, but he admitted that the president "didn't embrace it." Bush has stopped short of promising not to dip into the Social Security Trust Fund to fund his priorities, but promises that all beneficiaries will get their benefits.
Senator Pete Domenici (R-N.M.), ranking minority on the Senate Budget Committee, suggested last week that spending some of the Social Security surplus might be just what's needed to stimulate the economy.
On top of their varying approaches to resolving the current fiscal challenges, the White House and Democrats and Republicans in Congress face daunting challenges to resolve policy differences. These include significant disparities in their approaches to education, Medicare, Medicaid, and campaign finance reform, as well as a Patients' Bill of Rights, a national energy policy, a prescription drug benefit for seniors, full Trade Promotion Authority for the president, a minimum wage increase with tax cuts for small businesses and a capital gains tax cut, federal assistance for faith-based charities, and increased subsidies for farmers.
Prominent policy differences to be resolved include: