Budget Outlook in Congress: An Overview of Proposals and their Impact on Smart Power

May 13, 2011 By John Glenn

As lawmakers debate additional budget cuts in exchange for raising the debt ceiling, there are a number of proposals that Congress is considering that could critically impact funding for smart power.  Virtually all the budget cuts made this year have come from discretionary spending, programs funded annually through the Congressional appropriations process that include the International Affairs Budget.  Any future budget agreement will almost certainly include caps on discretionary spending for years to come.  The larger question is whether an agreement to raise the debt ceiling will once again solely include spending cuts or address entitlements and revenues?

Why does the debt ceiling debate matter to the International Affairs Budget?

Although many of these proposals do not explicitly target the International Affairs Budget, they could have potentially dramatic consequences for our civilian smart power tools.  Proposals that focus only on spending cuts will almost certainly lead to deep and disproportionate cuts in the International Affairs Budget.  Proposals that identify spending caps, for example, could be written into law fairly quickly without specifying where cuts would be made. This vacuum would leave the International Affairs Budget vulnerable under laws that would be very difficult to change or repeal.

In the recent agreement that averted a government shutdown and funded the government for the remainder of the current fiscal year (FY 2011), the International Affairs Budget shouldered nearly 20% of total spending cuts despite being only 1% of the total budget.  If the trend of disproportionate cuts to the International Affairs Budget were to continue, dramatic pressure on discretionary spending overall could have a dramatic impact on these programs.

What are the current proposals and how could they impact the International Affairs Budget?

  • Corker-McCaskill spending cap: The global spending cap introduced by Senator Bob Corker (R-TN) and Senator Claire McCaskill (D-MO) would limit total federal government spending to 20.6% of GDP, the historic average level of federal spending over the past 40 years.  This is substantially below the current level of 24% of GDP and would achieve its reductions by gradually lowering the cap over a decade. As mandatory entitlement costs rise with the retirement of the baby-boomers, the cap would almost certainly result in dramatic cuts in discretionary accounts. Given the outcome this year of the FY11 spending negotiations, severe cuts to discretionary spending could very likely have deep and disproportionate cuts to the International Affairs Budget.  The Corker-McCaskill proposal includes the possibility of additional “emergency spending” for national security purposes that could include funding for programs in frontline states, though it is unclear of civilian programs would be included.
  • Budget “triggers”: A second idea is a budget “trigger,” mentioned favorably by lawmakers such as  Finance Committee Chairman Max Baucus (D-MT).  Budget “triggers” would be automatically invoked if fixed levels were exceeded for the level of debt or the level of spending as percentage of GDP.  These triggers would force automatic spending cuts, revenue increases, or both.  No legislation has been written that specifies the nature of the trigger or response, although the Administration seems to be favoring a trigger faced on the level of debt rather than spending.  Regardless, a budget trigger that solely forces spending cuts could once again impact the International Affairs Budget disproportionately.  Senator Baucus has acknowledged that exempting mandatory programs from being affected by the trigger would place potentially catastrophic cuts on discretionary programs.
  • The “Gang of Six”:  Much media attention has been focused on the so-called “Gang of Six.” This bipartisan group consists of Senators Dick Durbin (D-IL), Kent Conrad (D-ND), Mark Warner (D-VA), Tom Coburn (R-OK) Mike Crapo (R-ID) and Saxby Chambliss (R-GA). While its members have been tight-lipped, the group has been working for several months to forge an agreement that would be similar to the recommendations last year of the President’s Commission on Fiscal Responsibility and Reform, led by Erskine Bowles and Alan Simpson.   The Bowles/Simpson plan proposes to reduce the deficit by $4 trillion over ten years through a combination of $3 trillion in spending cuts (to both discretionary and non-discretionary accounts) and $1 trillion in new revenue increases. Also, importantly, the Deficit Commission recommendations would create “firewalls” between security and non-security spending and include the International Affairs Budget on the security side.  The Commission proposal reduces security spending to overall FY 2010 levels in FY 2012 and then to FY 2008 levels in FY 2013, after which they may rise at levels below inflation.  The Commission also included 58 recommendations for reducing discretionary spending by $200 billion by 2015, including the call to slow the growth of foreign assistance.

With the looming vote this summer on raising the federal debt ceiling, efforts are clearly underway to find a broad agreement on spending, entitlements, and revenues.  At the same time, Congress is continuing its work on the fiscal year 2012  budget, which begins on October 1, 2011.  The House Appropriations Committee recently released its FY12 allocations, and all eyes are on the Senate, which has yet to even adopt a FY12 budget resolution.    Given the wide disparity in potential outcomes for the International Affairs Budget and the essential smart power programs it funds, we will continue to be actively engaged in these budget debates. As always, please visit our Budget Center at www.usglc.org for up-to-the-minute information.