1. House of Representatives Budget Resolution for FY2013

2. On March 23 Chairman of the House Budget Committee, Paul Ryan (R-WI) introduced H. Con. Res. 112 CONCURRENT RESOLUTION ON THE BUDGET-- FISCAL YEAR 2013

3. On March 23 House Budget Committee reported the measure to the full House on a vote of 19-18. Two Republicans on the Budget Committee voted not, Huelskamp and Amash, because the resolution did not go far enough in cutting spending.

4. On March 29 the Full House Passed H. Con. Res 112 by a vote of 228 to 191

5. What policy recommendations are contained in H. Con. Res. 112? How do these recommendations fit into the Budget Control Act and what the President recommended in February?

6. Sets a FY 2013 discretionary budget cap lower than the one set by the Budget Control Act H. Con. Res. 112 House Concurrent Budget Resolution for FY2013

7. Cancels the January 2013, BCA-mandated sequester of discretionary and mandatory spending in order to shield defense spending from cuts. H. Con. Res. 112 House Concurrent Budget Resolution for FY2013

8. Sequestration is replaced with cuts to non-defense discretionary and mandatory spending (which would be accomplished through budget reconciliation). H. Con. Res. 112 House Concurrent Budget Resolution for FY2013

9. Calls for reforming state grant programs, with Medicaid and the Supplemental Nutrition Assistance Program (SNAP) specifically identified for possible conversion to block grants. H. Con. Res. 112 House Concurrent Budget Resolution for FY2013

10. It also calls for a deficit-neutral overhaul of the tax code, with two personal income tax rates replacing the current structure and the repeal of unspecified tax preferences. It also would reduce the top corporate tax rate. H. Con. Res. 112 House Concurrent Budget Resolution for FY2013

11. April 3, President Obama characterized the Ryan budget as “Social Darwinism”. The survival of the fittest basically at the expense of others. H. Con. Res. 112 House Concurrent Budget Resolution for FY2013

12. Behind the Numbers How Does All This Work Together? House Budget Senate Budget President’s Budget Budget Control Act Sequestration Reconciliation Appropriations

13. The Congressional Budget Process

14. Congressional Budget Act of 1974

15. Establishes A Timetable For Congress To Consider Bills 15 th Day After A New Session Congress Begins President Submits Administration's Budget (Feb 2, 2012)

16. Congressional Budget Act of 1974 Establishes A Timetable For Congress To Consider Bills April 15—House And Senate Budget Committees Report Budget Resolution

17. Congressional Budget Act of 1974 Establishes A Timetable For Congress To Consider Bills May 15—Congress Completes Action On Budget Resolution

18. Congressional Budget Act of 1974 September 15—Congress completes action on bills and resolutions providing new budget authority and new spending authority.

19. Congressional Budget Act of 1974 Establishes A Timetable For Congress To Consider Bills October 1—Beginning of Fiscal Year

20. What Does A Budget Resolution Do?

21. The Budget Resolution is a concurrent resolution, meaning it is not sent to the President for approval or disapproval. Does not have the force of law. It is solely a Congressional mechanism used to help both the House and Senate come to agreement on overall spending and tax levels prior to drafting of appropriation bills or revenue measures for the upcoming fiscal year. It also sets spending and revenue policies for the next ten fiscal years.

22. What Is Contained In A Budget Resolution?

23. The amount, if any, of the surplus or the deficit in the budget

24. What Is Contained In A Budget Resolution? The recommended level of Federal revenues and the amount, if any, by which the aggregate level of Federal revenues should be increased or decreased.

25. What Is Contained In A Budget Resolution? The appropriate level of the public debt, and the amount, if any, by which the statutory limit on the public debt should be increased or decreased.

26. What Is Contained In A Budget Resolution? The appropriate level of total budget outlays and total budget authority.

27. What Is Contained In A Budget Resolution? May include reconciliation instructions (more on this later)

28. Once the House and Senate have agreed on a final version of the Budget Resolution, the House and Senate Appropriation Committees are given aggregate caps on discretionary spending. Called 302(a) allocations The Congressional Budget Process

29. 302(a) allocations represent the maximum amount budget authority contained in all appropriations bills in the upcoming Fiscal Year. Entitlement programs--often called direct spending or mandatory spending--do not get their budget authority through an appropriations bill and are therefore not covered by 302(a) allocations The Congressional Budget Process

30. 302(a) allocations are further divided up among the 12 appropriation subcommittees Called 302(b) allocations The Congressional Budget Process

31. 302(a) allocations are further divided up among the 12 appropriation subcommittees Called 302(b) allocations Each Subcommittee of the Appropriations Committee is responsible for making policy decisions on what programs to fund and what their funding levels are in order to comply with the 302(b) allocations The Congressional Budget Process

32. How is a Budget Resolution Different from the Budget Control Act?

33. The Budget Control Act Enacted in 2011 as part of the compromise to raise the national debt Established the Joint Select Committee on Deficit Reduction JSCDR goal was to report a bill that would cut federal deficit over 10 years by $1.2 trillion Established 302(a) caps in discretionary spending from FY2013 until FY2021

34. The Budget Control Act It does not contain any provisions dealing with revenues Unless Congress acts the Budget Control Act would allow the Bush-era tax cuts to be reinstated in full It does not distinguish between programs considered a priority and those of lesser importance It contains no policy recommendation on how to achieve budget savings

35. The Budget Control Act Mandates that 50 percent of all discretionary spending cuts must come from the Defense Department’s budget Mandatory and discretionary spending are cut proportionally Mandates sequestration starting with FY2013 and ending in 2021 Exempted many, but not all, human service programs from sequestration

36. What is Sequestration? January 2, 2013 sequestration is an across-the-board cut in each non- exempt account of both mandatory and discretionary spending that occurs. Between FY2014 and FY2021 sequestration applies only to discretionary spending. It was included in the BCA as a incentive to the Joint Select Committee on Deficit Reduction to avoid that Committee not act.

37. What is Sequestration? It was passed with the intention that it never would happen. Today many members of Congress and the Administration want to avoid sequestration because it cuts priority programs as well as non- priority programs by about 7.5% in January 2013.

38. How Sequestration Works The automatic spending reduction process entails three key steps:

39. How Sequestration Works 1.The amount of spending reduction required for each year is calculated and divided equally between two categories—Defense and non-Defense categories

40. How Sequestration Works 2.The annual amount of spending reductions required each year in each of these categories is further divided proportionally between discretionary appropriations and direct spending programs (excluding certain programs and activities) within each category; and

41. How Sequestration Works 3.The spending reductions required in each year (FY2013-FY2021) are achieved through a combination of sequestration and a downward adjustment of the revised discretionary spending limits.

42. Discretionary Spending Caps: Post-Sequester (Budget Authority in Billions) FY2013 Budget Control Act Pre Sequester $1,047 Defense $ 546 Non-- ‐ Defense $ 501 Sequester $ -98 Defense $ ‐ 55 Non-Defense $ ‐ 43 Budget Control Act Post-- ‐ Sequester $949 Defense $491 Non-Defense $458

43. (In billions) Fiscal YearOriginal Limits on all Discretionary 2013 $1,047 302(a) Allocations in Budget Control Act

44. (In billions) Fiscal YearOriginal Limits on all Discretionary 2013 $ 950 302(a) Allocations in After Sequestration

45. (In billions) Fiscal YearOriginal Limits on all Discretionary 2013 $1,028 302(a) Allocations in H. Con Res. 112

46. (In billions) Fiscal YearOriginal Limits on all Discretionary 2013 $1,028 302(a) Allocations in H. Con Res. 112 To achieve additional savings the House Budget Resolution includes what are know as reconciliation instructions

47. What is Reconciliation?

48. A special procedure to give expedited consideration to bills enacting the spending, revenue, and debt policies contained in the budget resolution. What is Reconciliation?

49. A special procedure to give expedited consideration to bills enacting the spending, revenue, and debt policies contained in the budget resolution. In order to qualify for these special expedited procedures, both the House and Senate must agree on the same budget resolution and it must include reconciliation instructions. What is Reconciliation?

50. To trigger these expedited procedures, the budget resolution must include reconciliation instructions calling on specific committees to achieve specified amounts of savings in programs within their jurisdictions. What is Reconciliation?

51. The Budget Resolution may include specific recommendations on how to achieve savings, or raise revenues. However these are only recommendations. The committees of jurisdiction choose which programs to address and which policies to adopt. They are required to specific changes to current law to their Budget Committee. What is Reconciliation?

52. A reconciliation bill is a way for Congress to review and amend entitlement programs to reduce spending that otherwise would not happen. What is Reconciliation?

53. A reconciliation cannot be filibuster in the Senate so it is a very power tool that can be used to break the normal Congressional deadlock. What is Reconciliation?

54. Budget Resolution House Appropriations Committee 302(a) Caps Senate Appropriations Committee 302(a) Caps House Appropriations Subcommittee 302(b) Caps Senate Appropriations Subcommittee 302(b) Caps Agriculture Commerce, Justice Science Defense Energy & Water Development Financial Services Homeland Security Interior, Environment Labor, HHS, Education Legislative Branch Military Construction, VA State Foreign Operations Transportation, HUD Agriculture Commerce, Justice Science Defense Energy & Water Development Financial Services Homeland Security Interior, Environment Labor, HHS, Education Legislative Branch Military Construction, VA State Foreign Operations Transportation, HUD Final Appropriation Bills Conference Committees, Draft Compromise Bills

55. Budget Resolution Reconciliation Instructions Agriculture Energy and Commerce Financial Services Judiciary Oversight & Government Reform Ways and Means Agriculture Banking, Housing and Urban Affairs Commerce, Science and Transportation Energy and Natural Resources Finance Health and Education, Labor and Pensions Judiciary House Budget Committee Reconciliation Bill HouseSenatePresident Senate Budget Committee Reconciliation Bill Conference Committee Compromise Bill House Senate

56. What Does H. Con. Res. 112 Do?

57. What does the House Budget Resolution do? House BudgetFY2013 Outlays$3,624 billion Revenues$2,734 billion Deficit$ 797 billion Compared to the President’s budget proposal Outlays$ -187 billion Revenues$ - 7 billion Deficit$ -180 billion

58. What does the House Budget Resolution do? House BudgetFY2013 Outlays$3,624 billion Revenues$2,734 billion Deficit$ 797 billion Compared to the President’s budget proposal Outlays$ -187 Revenues$ - 7 Deficit$ -180 Includes Reconciliation instructions

59. “The welfare reforms of the late 1990s are a success story of modern domestic policy, but they did not go as far as many think. Reformers were not able to extend their work beyond cash welfare to other means-tested programs. Notably, programs that subsidize food and housing for low-income Americans remain dysfunctional, and their explosive growth is threatening the overall strength of the safety net.” Chairman Paul Ryan:

60. “If the government continues running trillion-dollar deficits and experiences a debt crisis, the poor and vulnerable will undoubtedly be the hardest hit, as the Federal Government’s only recourse will be severe, across-the-board cuts.” Chairman Paul Ryan:

61. H. Con. Res. 112 Policy Recommendations

62. Reduce Spending on the Low Income Home Energy Assistance Program [LIHEAP]. Assumes the same level of funding for LIHEAP in President Obama’s fiscal year 2013 budget request.

63. H. Con. Res. 112 Policy Recommendations Reduce Spending on the Low Income Home Energy Assistance Program [LIHEAP].. LIHEAP provides low-income families with help to pay heating bills. However, many states are providing families with $1.00 in LIHEAP benefits in order to increase SNAP benefits. This proposal would eliminate that abuse.

64. H. Con. Res. 112 Policy Recommendations Block Grant the Supplemental Nutrition Assistance Program [SNAP]. “Spending on SNAP—formerly known as the Food Stamp Program—has increased dramatically over the past three years. SNAP spending grew from $20.6 billion in 2002 to nearly $40 billion in 2008, and is projected to be over $80 billion in 2012. While the increase between 2008 and 2012 is partially due to the recession, SNAP spending is forecast to be permanently higher than previous estimates even after employment has recovered.”

65. H. Con. Res. 112 Policy Recommendations Block Grant the Supplemental Nutrition Assistance Program “A variety of factors are driving the high growth in SNAP funding, but one major reason is that while the States have the responsibility of administering the program, they have little incentive to ensure it is well run. The budget resolution envisions converting SNAP into an allotment tailored for each State’s low-income population, indexed for inflation and eligibility. This option would make no changes to SNAP until 2016—after employment has recovered—providing States with time to structure their own programs.”

66. H. Con. Res. 112 Policy Recommendations Block Grant the Supplemental Nutrition Assistance Program: “It would also envision improving work incentives by requiring a certain amount of people to engage in work activity, such as job search, community service activities and education and job training. This proposal is estimated to save $122.5 billion over 10 years.”

67. H. Con. Res. 112 Policy Recommendations Eliminate Broad-Based Categorical Eligibility: Broad-based categorical eligibility allows for households to be made eligible through receiving a minimal Temporary Assistance for Needy Families [TANF] fund benefit or service. Typically, an individual is made eligible by receiving a TANF brochure or being referred to a social services ‘‘800’’ telephone number. This allows individuals to qualify for SNAP benefits under less restrictive criteria. For example, 40 states currently have no asset test for receiving SNAP benefits.

68. H. Con. Res. 112 Policy Recommendations Reform Supplemental Security Income: “Welfare programs typically pay benefits on a sliding scale. However, SSI is different, paying an average of $600 for each and every child in a household that receives benefits. This reform would create a sliding scale for children on SSI.”

69. H. Con. Res. 112 Policy Recommendations Reform Means-Tested Entitlements: “Congress should act to reform means-tested entitlements. These programs have grown rapidly over the past 10 years, and Congress should cap these programs and begin devolving them to the States. This would build upon the historic progress of bipartisan welfare reform in the late 1990s. These reforms transformed cash welfare by encouraging work, limiting the duration of benefits, and giving states more control over how money was being spent. The TANF reforms of the old Aid for Families with Dependent Children cut welfare caseloads in half as poverty rates declined.”

70. H. Con. Res. 112 Policy Recommendations Terminate the Duplicative Social Services Block Grant: “The Social Services Block Grant is an annual payment sent to States without a matching requirement to help achieve a range of social goals, including child care, health services, and employment services. Most of these are also funded by other Federal programs. States are given wide discretion to determine how to spend this money and are not required to demonstrate the outcomes of this spending, so there is no evidence of its effectiveness. The budget recommends eliminating this duplicative spending.”

71. H. Con. Res. 112 Policy Recommendations Medicaid Block Grant “Medicaid’s flawed financing structure has created rapidly rising costs that are nearly impossible to check. Mandate upon mandate has been foisted upon states under the flawed premise that the best ideas for repairing this important health care safety net can come only from Washington. This budget ends that misguided approach and instead converts the federal share of Medicaid spending into a block grant, thus freeing states to tailor their Medicaid programs to the unique needs of their own populations.”

72. H. Con. Res. 112 Policy Recommendations Medicaid Reform Secure Medicaid benefits by converting the federal share of Medicaid spending into a block grant indexed for inflation and population growth. This reform ends the misguided one-size ‐ fits ‐ all approach that has tied the hands of so many state governments. States will no longer be shackled by federally determined program requirements and enrollment criteria. Instead, they will have the freedom and flexibility to tailor Medicaid programs that fit the needs of their unique populations.

73. H. Con. Res. 112 Policy Recommendations Medicare Reform: For younger workers, when they reach eligibility, Medicare will provide a Medicare payment and a list of guaranteed coverage options – including a traditional fee ‐ for– service option from which recipients can choose a plan that best suits their needs. This plan is called primum support. It is similar to a plan first introduced by former head of CBO Alice Rivlin. Medicare will provide additional assistance for lower-- ‐ income beneficiaries and those with greater health care needs.

74. H. Con. Res. 112 Policy Recommendations Simplifying the Tax Code and Promoting Job Creation and Economic Growth Consolidate the current six individual income tax brackets into just two brackets of 10 and 25 percent. Reduce the corporate rate to 25 percent. Repeal the Alternative Minimum Tax. Broaden the tax base to maintain revenue growth at a level consistent with current tax policy and at a share of the economy consistent with historical norms of 18 to 19 percent in the following decades.

75. What Does The House Budget Resolution Not Do?

76. Because the resolution is a concurrent resolution, it does not have the force of law.

77. What Does The House Budget Resolution Not Do? It requires the Senate to concur with reconciliation before it can occur The House could pass a bill that contains all of the recommendations included in the budget. However such a bill would not have the protections built into reconciliation such as a prohibition on against a filibuster.

78. What Does The House Budget Resolution Not Do? Does not amend or eliminate the provisions of the Budget Control Act, including sequestration.

79. What Does The House Budget Resolution Not Do? It does NOT establish discretionary spending caps (302(a)) allocations for the Senate. The House will have to pass a resolution “deeming” that the provisions of H. Con. Res. 112 are effective as far as the House is concerned.

80. How Does The House Budget Resolution Work In Conjunction With The Budget Control Act? H. Con. Res. 112 contains language requiring the Budget Committee to report a bill that eliminates sequestration. However, that bill shall include language making its application contingent upon the enactment of a reconciliation bill. Without a reconciliation bill sequestration occurs on January 2, 2013

81. What about a Senate budget? Senate Majority Leader Harry Reid (D-NV) has made it clear on a number of occasions that he will not bring a budget resolution to the floor of the Senate.

82. What about a Senate budget? It is the Majority Leader’s position is that the BCA sets discretionary spending levels and therefore no new Budget Resolution is necessary. He believes that when the House agreed to pass the BCA they also agreed to the spending levels contained in the bill. This opinion is not shared by House Republicans who view those caps as maximum spending levels, not actual spending levels.

83. What about a Senate budget? Since there is strong opposition to the sequestration provisions of the BCA, it is highly anticipated that some kind of substitute to sequestration will be considered but only after the November elections.

84. What Happens Next? The House and Senate will each “deem” their respective 302(a) allocations and work toward drafting appropriation bills. No real effort to pass a tax reform bill of any kind is expected until after the November elections.

85. What Happens Next? There will be no reconciliation bill, although the House will produce a reconciliation-like bill that will lack special procedural consideration. It will not pass the Senate. If sequestration is to be avoided, a bill will have to be enacted, most likely after the elections. What replaces sequestrations is impossible to predict this time.

86. What Role Does The President’s Budget Play? The House of Representatives voted on a substitute budget resolution to replace the Ryan budget with the President's budget. It failed on a vote of 0-419. Democrats in the House claimed the amendment, offered by Rep. Mick Mulvaney (R-SC), a Republican, was nothing more than a political gimmick to embarrass the President. Nether the House nor the Senate will use the President's recommendations in considering appropriation bills, entitlement reforms, or revenues measures.

87. What to expect for the rest of the year as Congress tries to draft appropriations for FY2013? Do not expect any of the major recommendations contained in either the President's budget or the House Republican budget to be enacted in 2012.

88. What to expect for the rest of the year as Congress tries to draft appropriations for FY2013? It will be difficult for the House and Senate Appropriation Committees to find common ground. It is highly likely that the Congress will have to pass at least one, and maybe a series of continuing resolutions to fund much of the government.

89. What to expect for the rest of the year as Congress tries to draft appropriations for FY2013? It is highly unlikely that any bill eliminating sequestration will pass before November. However, after the election, there is a very good possibility that an alternative to sequestration will be enacted.

90. What Happens In December? The Bush-era tax cuts expire—adding $5 trillion in revenues to the US treasury over the next 10 years Sequestration takes effect January 2, 2013 ($98 billion) The Social Security payroll tax break expires ($100 billion) It is likely that Congress will have to increase the statutory debt limit Strong possibility that a continuing resolution to fund the government will need to be passed in December The current extension on unemployment benefits expire A new Congress, perhaps with different majorities in the House and Senate convenes on January 2, 2013 The President is sworn in on January 20, 2013

92. How To Calculate Spending Caps

93. Determine Revised Limits on Discretionary Sending Discretionary spending limits are established in BCA but are subject to revision

94. How To Calculate Spending Caps The revised limits on discretionary spending may fluctuate to accommodate:  Emergency requirements  Appropriations for Overseas Contingency Operations/Global War on Terrorism  Appropriations for continuing disability reviews  Appropriations for controlling health care fraud and abuse  Appropriations designed as being for disaster relief

95. Subtract estimated amount of saving from payments on interest from total amount of spending cuts i.e. $1.2 trillion How To Calculate Spending Caps

96. Subtract estimated amount of saving from payments on interest from total amount of spending cuts i.e. $1.2 trillion Estimated at 18% $1,200,000,000,000 x.18 = $216,000,000,000 $1,200,000,000,000 - $216,000,000,000 = $984,000,000,000 How To Calculate Spending Caps

97. Divide target amount equally between Defense and non-Defense spending $984,000,000,000 ÷ 2= $492,000,000,000 (over nine years) How To Calculate Spending Caps

98. Determine how much the deficit must be reduced each year from FY2013 until FY2021 (Total of nine years) $492,000,000,000 ÷ 9= $54,666,666,666 The $54.7 billion reduction is for both discretionary and mandatory spending combined in each category How To Calculate Spending Caps

99. To determine proportions of spending reductions to allocate toward discretionary or mandatory: Multiply $54.7 billion by discretionary spending cap Divide by total (discretionary and mandatory) non-exempt spending = reduction in discretionary spending in that category To determine mandatory amount subject to sequestration simply subtract discretionary reductions from $54.7 billion. How To Calculate Spending Caps

100. Example for FY 2014 Non-Defense Category Discretionary spending cap = $510 billion $54.7 billion x $510 billion = $27.88 trillion $27.88 trillion ÷ ($510 billion +~$206 billion) = $38.9 billion How To Calculate Spending Caps Discretionar y Cap OMB’s Baseline Estimate for Mandatory Spending {{ + = $716 billion in total non-exempt spending

101. Example for FY 2014 Non-Defense Category Discretionary spending cap = $510 billion $38.9 billion reduction in discretionary spending cap $15.7 billion reduction in non-exempt mandatory spending Total savings of $54.7 billion How To Calculate Spending Caps

102. Example for FY 2014 Non-Defense Category Discretionary spending cap = $510 billion $38.9 billion reduction in discretionary spending cap $510 billion – $38.9 billion = $471.1 billion (new discretionary spending cap for aggregate appropriations in fiscal year) How To Calculate Spending Caps

103. How Sequestration Works Revised Statutory Limits on Discretionary Spending if Automatic Spending Reduction Process is Triggered (in billions of budget authority) Fiscal Year Revised Security Revised Non-security Category Category 2013 $546 $501 2014 $556 $471 2015 $566 $520 2016 $577 $530 2017 $590 $541 2018 $603 $553 2019 $616 $566 2020 $630$578 2021 $644 $590

104. Example for FY 2014 Non-Defense Category Discretionary spending cap = $510 billion $15.7 billion reduction in non-exempt mandatory spending $15.7 billion cut from $206 billion in mandatory spending via sequestration How To Calculate Spending Caps

105. Example for FY 2014 Non-Defense Category Discretionary spending cap = $510 billion $15.7 billion reduction in non-exempt mandatory spending $15.7 billion cut from $206 billion in mandatory spending via sequestration $15.7 billion is 7.6% of $206 billion, so all non-exempt programs in the non-Defense category would be reduced by 7.6%. How To Calculate Spending Caps

106. Example for FY 2014 Non-Defense Category Discretionary spending cap = $510 billion $38.9 billion reduction in discretionary spending cap Medicaid is exempted from sequestration and Medicare provider cuts are limited no more than 2%. Any cuts for Medicare provider benefits above 2% are subtracted from the discretionary spending cap Final discretionary spending cap reduction is $38.9 billion + the additional Medicare cuts above 2% How To Calculate Spending Caps

107. Why is the Budget Control Act and sequestration so important? Sequestration in Mandatory spending for FY2014 is estimated at about 7.5% A budget in FY 2013 of $1, 000,000,000 lowered 7.5% each year for ten years would have $495,764,693 in FY2021 Or less than 50% of its FY2013 funding