By Larry Jones
July 3, 2006

By a vote of 12 – 10 strictly along party lines, the Senate Budget Committee approved a proposal (S. 3521) on June 20 that will make radical changes in the budget process by establishing new rules to control federal spending. Under the proposal, sponsored by Budget Committee Chairman Judd Gregg (N.H.), four new rules were adopted. These include:

strict limits would be set on discretionary spending for domestic programs;

targets would be set to reduce the federal deficit;

the President would be granted line-item rescission authority;

commissions would be established to recommend programs for terminations and realignments, and to ensure the long-term solvency of Social Security, Medicare and Medicaid.

For domestic programs, Senator Gregg’s proposal would limit spending to the levels set in the President’s 2007 budget request, which calls for a total of $66 billion in cuts over the next three years. According to an analysis prepared by the Center on Budget Policy and Priorities (CBPP) these cuts would affect almost all categories of programs. For example the analysis explains that for 2009 the President’s budget calls for a $459 million cut in women, infant and children nutrition program, which would reduce the number of low-income women served by an estimated 680,000. It also calls for a $1.5 billion (73.5 percent) cut in vocational and adult education, a $1.4 billion (15 percent) cut in children and family services (which includes Head Start, services for abused and neglected children, and the community services block grant program), a $1.6 billion (49 percent) cut in the low-income energy assistance program, a $2.5 billion (8 percent) cut in funds for the National Institute of Health and a $354 million (19 percent) cut in funds for the Environmental Protection Agency’s clean water program.

The Gregg proposal sets targets to reduce the federal budget deficit from 2.75 percent of the Gross Domestic Product (GDP) in 2007 to 0.5 percent in 2012 and every year thereafter. These targets would be enforced by automatic, across-the-board cuts in all entitlement programs except Social Security. Using the Congressional Budget Office’s budget projections, the CBPP estimates the federal deficit will equal 1.9 percent of the GDP in 2012, which means the gap between this projected deficit and the 0.5 target would amount to a deficit of $252 billion. Under Senator Gregg’s proposal, if Congress does not enact legislation to close the budget gap, the entire $252 billion in savings would have to be achieved through across-the-board cuts in entitlement programs including those that provide basic assistance to needy individuals, unemployment insurance, veterans programs and Medicare.

Under Senator Gregg’s proposal the President would be given line-item rescission authority. The President would have up to one year after a bill is enacted to propose rescissions or the cancellation of some of the funds in an appropriations bill. Further, he would be allowed to withhold the funds proposed for rescissions for 45 days after submitting his initial request to Congress, and if Congress votes down the President’s request, he would be allowed to withhold the funds for another 45 days. This new rule would effectively allow the President to withhold some appropriated funds through the end of a fiscal year even if Congress votes down his rescission request. Further, it would permit the President to package the cancellation of funds from different appropriations bills into a single rescissions package, which Congress would have to approve or reject as a whole.

Two commissions (both comprised of 9 Republicans and 6 Democrats) would be established under the Gregg proposal: a sunset commission and a commission on Social Security, Medicare and Medicaid. The Sunset commission would be charged with the responsibility of examining both entitlement and discretionary programs and developing a plan recommending terminations and realignments of various programs. Only a simple majority vote would be required to approve the commission’s plan, which must be submitted to Congress where it would be considered on a fast-track basis. A simple 51 vote majority would be required to approve the plan in the Senate. With only a simple majority vote required of the commission and Congress, the programs included in the plan for terminations and realignments could be developed purely on the basis of partisan politics.

The Gregg proposal also establishes a commission on Social Security, Medicare, and Medicaid to develop a plan to ensure the log-term “solvency” of these programs. Ten votes would be required to approve this commission’s plan which also must be submitted to Congress and would be given fast-track status. Amendments to the commission’s plan would be permitted and 60 votes would be required to approve it in the Senate. The CBPP explains that the proposal sets new solvency targets that would force deep cuts in these programs. For example, CBPP points out that meeting the “solvency target would require Medicaid cuts of 22 percent by 2020, 36 percent by 2030 and 50 percent by 2042.”