Last week the House Budget Committee held their first hearing and opportunity to look at the FY 2020 horizon.
The Administration has formally announced it will delay the release of the proposed Fiscal Year 2020 budget beyond this Monday’s required deadline. They have not given a date but the government shutdown of last month means that there are no final numbers for seven of the 12 annual appropriations bills or twenty-five percent of the appropriated budget. The Administration has indicated that they will propose a 5 percent cut in non-defense spending. They also said that there would be some cuts to the Department of Defense.
The President will deliver his State of the Union address Tuesday night, but it will not be followed by the release of a new budget. That traditionally that happens the week after on the first Monday in February.
The Democrats will write a budget resolution, that sets spending levels for the upcoming year, that anticipates an increase in the corporate tax rate. The December 2017 tax cut package reduced the corporate from 35 percent to 21 percent. Budget Chair John Yarmuth (D-KY) did not give specific figures but some Republicans on the Committee suggested Democrats would set it at 29 percent.
The deficit for the current year is projected to be at just under $900 billion with current projections being for it to exceed a trillion within two years. According to the Congressional Budget Office (CBO), annual budget deficits will rise under current law to $1 trillion in 2020 and eclipse $1.1 trillion by 2022 and it will reach nearly $1.4 trillion late in the decade. According to CBO, growing deficits and debt are the result of rising spending and depressed revenue. Under current law, spending will grow from 20.3 percent of GDP in 2018 to 22.7 percent by 2029 while revenue will remain around 17 percent of GDP through 2025. It would rise to 18.3 percent by 2029 if you assume the December 2017 tax cuts that have an expiration date will be allowed to expire.
Democrats are envisioning a FY 2020 budget resolution that is finalized by early April before the required bicameral April 15 resolution deadline. This would be the case even if the Senate does not go along and the Administration delays their budget proposal into March.
Budget Chair Yarmuth said that he hopes new spending caps can be agreed to since current law, left unaltered like FY 2019 and 2020, would require a cut of 9 percent in non-defense spending and 11 percent for defense. Despite the category “non-defense” includes veterans spending, military construction and the State Department.