The Budget Battle:

Fighting to Define America's Priorities

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For the past year and a half, a war over the federal budget has enveloped our nation's capital. Much like war in the military sense, there have been multiple battlefronts, both individually and collectively significant. Likewise, there are two distinct opponents with two clearly competing agendas.

So what are they fighting over? Separate battles have been waged over discretionary funding levels, defense and non-defense category spending, entitlement programs, tax policy, the federal debt ceiling, and even government shutdowns. But these are just the individual debates that have erupted during the past 18 months. The war itself connects these battles together into a much broader theme. In reality, the war is being fought over the role and scope of the federal government in American society.

The two sides are divided over a very fundamental question: can the federal government be a force for good? If you believe that the federal government can, in fact, help alleviate poverty, promote economic mobility, and protect and help care for vulnerable populations, then you would be more likely to believe in preserving and strengthening America's federal social safety net. You would most likely, for instance, support expanding Medicaid, providing nutrition assistance to low-income families, and enrolling as many children as possible in Head Start programs. However, should you doubt the federal government's effectiveness in these areas, you might believe that it should move aside and let states, communities, or non-governmental entities support citizens in need. In that case, you might believe that many federal programs are inefficient, create dependency, and should be curtailed or eliminated. The outcome of this debate will define America's priorities as a country in the 21st century.

The backdrop to this war is the recent realization of the limits of the country's fiscal resources. Federal deficits have been steadily accruing since the turn of the century. Revenues being collected are not keeping pace with expenditures, especially taking into account our entanglement in two foreign wars for the better part of the last decade. America's debt, relative to the size of its economy, is becoming worrisome, and it is widely recognized that the federal government cannot sustain its current fiscal trajectory. There is very little debate about this diagnosis. Disagreements predictably arise, however, about how to treat it.

At stake are a number of critical questions. How did the economic downturn exacerbate the country's fiscal deterioration, and to what extent would an economic turnaround improve things? Are federal deficits the result of runaway spending or a tax policy that has reduced revenue? What role should spending cuts and revenue increases play in any deficit reduction plan? How much of a role do soaring health care costs play in America's long-term deficit problem and what can be done about that? Can the United States afford the entitlement programs it has promised retirees, the elderly, and the poor? Can military spending be reigned in without jeopardizing American security?

These difficult and complex questions yield no universally accepted answers, and have consequently been fought over again and again throughout each phase of the budget war. Still, despite 18 months of back and forth, the government isn't much closer to answering these questions. The debate, up to this point, largely remains a stalemate. Looking ahead, however, 2012 is poised to be a pivotal year.

The President's Budget and the Congressional Budget Resolution

This year's first budget battle began in mid-February when President Obama released his budget proposal for Fiscal Year 2013 (FY 2013). Every year, the president sends his budget proposal to Congress, revealing his fiscal priorities and making suggestions on what to fund in the coming year. The proposal is non-binding, and Congress is free to accept or disregard as much of it as it desires. It is important, though, in setting the parameters for the year's budget debate. Following the release of the president's budget, Congress typically holds a series of hearings with Cabinet heads and budget writers to hear testimony and ask questions about the proposal. After the hearing process concludes, Congress turns toward writing its own budget resolution.

Unlike the president's budget, the congressional budget resolution is binding if it passes both chambers of Congress. While it typically does not set funding levels for many specific programs, the congressional budget resolution can propose, and even enact through the reconciliation process, modifications to major programs like entitlements. It also caps spending by function, or category. These caps then determine how much funding the appropriations committees are allowed to disperse when Congress turns to the final phase of the budget process: the appropriations phase. So while a congressional budget resolution is unlikely to describe how much funding a program like Head Start will receive in the coming fiscal year, it can propose broadly reducing discretionary spending programs in certain categories. It can also propose dismantling an entitlement program.

In late March, the House Budget Committee released, marked up, and passed their FY 2013 budget resolution. By the end of the month, the full House had passed the budget resolution. Meanwhile, in lieu of a budget resolution, the Senate Budget Committee filed a deeming resolution, a procedural shortcut that sets spending levels. The differences between the House budget resolution and the proposals from the Senate and President Obama are stark, and reflective of the priorities of the two sides in the budget war.

Sequestration Cuts

Last year, with the federal government on the brink of defaulting on its loan obligations, Congress and President Obama came together to enact the Budget Control Act (BCA). That law included two important provisions that will impact the FY 2013 budget process. First, it created a Congressional supercommittee to pass legislation reducing the deficit further, with a series of automatic spending cuts known as sequestration to be triggered if the supercommittee failed. By the end of 2011, the supercommittee had disbanded without achieving its goals; the sequestration cuts, scheduled to go into effect beginning in January 2013, were officially set in motion. Secondly, the BCA imposed a series of fiscal year-specific spending caps, resulting in almost $1 trillion in cuts to discretionary spending over the next decade. Together, these provisions mean that discretionary spending will be capped in 2013 and cut further by sequestration.

Under current law, approximately $110 billion is scheduled to be sequestered from the final appropriated spending levels in FY 2013. Furthermore, the cuts are supposed to be evenly divided between defense and non-defense programs, with $55 billion coming from each. Importantly, a number of programs have also been specifically exempted from cuts, including programs serving low-income families like IV-E Foster Care and Adoption Assistance, Medicaid, the Children's Health Insurance Program (CHIP), the Supple-mental Nutrition Assistance Program (SNAP), Temporary Assistance for Needy Families (TANF), the mandatory portion of the Child Care and Development Block Grant (CCDBG), and others. This means that programs that are subject to sequestration, including Child Welfare Services (CWS), Promoting Safe and Stable Families (PSSF), the discretionary side of CCDBG, the Social Services Block Grant (SSBG), CAPTA programs, juvenile justice programs, and others will receive about a 7.8 percent cut from their final appropriated funding levels.

Many in Congress, across the ideological spectrum, want to do away with the scheduled sequestration cuts. However, the most organized effort to undo the cuts has come from those who are especially concerned with the potential impact of the defense cuts. Since President Obama has threatened to veto an outright appeal, most of the focus has been on restructuring the cuts, as reflected in the House budget resolution. Specifically, the resolution would undo the $55 billion in defense cuts scheduled for 2013 and replace them with $260 billion in cuts to undetermined non-defense programs over the next several years. It would also leave in place the $55 billion in scheduled cuts to non-defense programs for 2013. The cumulative result would be a shift from equal $55 billion cuts to both defense and non-defense to a $260 billion cut from non-defense while defense programs would be completely spared.

The sequestration cuts were carefully designed on a bipartisan basis when drafting the Budget Control Act. Predictably, the proposal to shift the burden of sequestration solely to the non-defense side of the ledger has proved very controversial. President Obama and the Senate Budget Committee oppose the House's restructure of sequestration, but passage of the budget resolution by the House ensures that the issue will continue to be debated.

Spending Caps

Sequestration isn't the only dispute between the House and the Senate and President Obama. Disagreements have also arisen about the FY 2013 spending cap. Under the BCA, the spending cap for FY 2013 is set at $1.047 trillion. To put that in perspective, the spending cap under BCA for FY 2012 was $1.043 trillion, which Congress accepted when finalizing the FY 2012 appropriations process. This means that if Congress abides by the cap in FY 2013, it will be essentially freezing discretionary spending at the prior year's levels.

The House wants to go even further, however. Under the House-passed budget resolution, discretionary spending would be cut $19 billion below the BCA cap to $1.028 trillion. Further, the House would actually increase defense spending by $8 billion, meaning that to comply with the proposed $1.028 trillion cap, non-defense programs would have to be cut $27 billion below the BCA cap. Once again, this proposal has met with stiff resistance from the Senate and President Obama as the spending caps, like sequestration, were the product of prolonged bipartisan negotiations when writing the law. As noted earlier, Senate Budget Chairman Kent Conrad (D-ND) has introduced a deeming resolution setting spending levels consistent with the $1.047 trillion cap outlined in the BCA. Prior budget battles about spending levels over the past 18 months indicate that rectifying the differences between the House and the Senate and President in the coming year will be a long, difficult process.

Future of Entitlement Programs

In addition to all of the pressure on the discretionary programs highlighted above, entitlement programs also come under attack in the House budget resolution. Recipients of Medicaid, food stamps, and other means-tested programs like job training would also be subjected to stringent work requirements and time limits, similar to those imposed in the 1990s for TANF. As welfare reform has demonstrated, this would mean fewer and fewer people being served by these programs for various reasons, often at no fault of their own.

Medicaid and food stamps are being particularly targeted. Medicaid would be replaced with block grants to states that would be capped and indexed for population growth and inflation, but not the cost of medical care which greatly exceeds that of inflation and population growth. By its own estimates, the House budget would reduce Medicaid funding by over $800 billion in the next 10 years. Meanwhile, the Supplemental Nutrition Assistance Program (food stamps) would also be converted to a block grant and eligibility would be curtailed along with program funding. Again converting this program into a block grant would fail to ensure that program funding meets the needs of its target population, especially during an economic downturn when the number of recipients generally increases.

Similar proposals were included in the House budget resolution last year, opposed by the Senate and President, and ultimately rejected. Their resurfacing in this year's budget shows that proponents of dismantling these critical entitlement programs are not giving up anytime soon, though. Along with sequestration and the FY 2013 spending caps, these issues will be fought over in the coming year between the two sides in this ongoing budget war.

What This All Means for CWLA Members

In summary, with the cuts already enacted by the Budget Control Act and others looming through sequestration and the FY 2013 budget process, it will be increasingly difficult for discretionary programs to survive the appropriations process unscathed. Mandatory and entitlement programs are also at risk of being weakened and scaled back. At this rate, federal resources for children and families within or at risk of entering the child welfare system could be progressively scarce in the years ahead.

However, with a number of important budget battles on the horizon and a presidential campaign underway, the tide could seriously turn in the budget war during the upcoming year. The question of whether we as Americans believe that the federal government can be a force for good will likely be answered in the halls of Congress and in voting booths across the country in 2012. The outcome of these battles will have far-reaching effects on the social safety net and the children and families it is designed to serve. CWLA members, staff, and our partners in the child welfare advocacy community will need to be even more active, diligent, and effective in our efforts to show the value of these programs and services, both in moral terms and in dollars. We have our work cut out for us.

Sean Hughes is the Co-Director of Government Affairs at CWLA.

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