As the 112th Congress wrapped up, President Obama signed H.R. 8, The American Taxpayer Relief Act of 2012, into law on January 3. The 113th Congress and the Administration now face the major fiscal issues the 112th Congress did not resolve and that need immediate attention. In the next three months, lawmakers must address the debt ceiling in February, alternatives to sequestration, now scheduled to begin March 1, and finalize FY13 appropriations before the expiration of the continuing resolution (CR) on March 27 (see Memo, 1/2). Major tax reform is also on the agenda for the new Congress.
The release of the President’s FY14 budget, statutorily required by the first Monday in February of each year, could now be delayed. The Office of Management and Budget (OMB) initiated this delay in part because Congress had not yet addressed these broad financial issues, including FY13 funding. Final FY13 funding levels are necessary for OMB to establish the President’s budget request to Congress, and H.R. 8 changes the spending cap for FY14.
The federal government has already reached the congressionally authorized limit on borrowing, known as the “debt ceiling.” Treasury Secretary Tim Geithner is now employing a variety of techniques to stretch the time before the United States defaults on its debt until February, when Congress must act. The debt ceiling problem is shaping up to be a repeat of the disastrous debt ceiling debate in the summer of 2011 that led to the Budget Control Act of 2011 and the sequester. Republicans are threatening to demand spending cuts equal to the amount that the debt ceiling is raised.
H.R. 8 also delayed action on sequestration for two months, preventing across-the-board cuts to all discretionary programs, including most federal housing programs. These cuts will automatically go into effect unless Congress finds a solution or votes to delay it further. Given that H.R. 8 raised taxes on some upper income households, some Republicans are now demanding spending cuts only without the addition of any other revenues. Unless changed, the sequester is set to make cuts that will achieve a $1.2 trillion reduction in the deficit over a 10-year period.
The third major budget business for the Congress is to finish its FY13 appropriations bills.
H.R. 8 establishes a new FY13 spending cap that may force appropriators to revise the subcommittee bills that had already been informally negotiated in the 112th Congress. It is not yet clear whether appropriators will try to move an omnibus bill in the 113th Congress or pass another CR to keep the government funded through the remaining six months of the year.
Before the House and Senate Committees on Appropriations allocated funds for each of the 12 appropriations subcommittees, advocates urged committee members to significantly increase the Transportation, Housing and Urban Development, and Related Agencies (THUD) FY13 allocation, which was cut disproportionately in FY12. The House and Senate appropriations subcommittees on THUD and Agriculture, Rural Development, and Food and Drug Administration and Related Agencies then crafted FY13 bills according to the respective allocations, known as the 302(b) allocations.
Between April and June, the House and Senate took their final actions on the THUD and Agriculture bills for the year. The Senate Committee on Appropriations marked up its FY13 THUD spending bill, S. 2322, in April, and the full house passed its THUD bill, H.R. 5972, in June. The Senate Committee on Appropriations also passed its FY13 Agriculture spending bill, S. 2375, in April; the House Committee on Appropriations passed its Agriculture bill, H.R. 5973, in June (see Memo, 9/14). Appropriations Committee members reportedly began reconciling the differences between the House and Senate bills in the fall. However, Congress took no further action on individual bills. Instead, in September, Congress passed a continuing resolution (CR) funding the government at FY12 levels through March 27, 2013.
The start of the 112th Congress was as tumultuous as its conclusion. Lawmakers began the 112th Congress in 2011 already behind on their FY11 budget and appropriations work. Members of Congress could not agree on funding levels until mid-April 2011, after passing a series of continuing resolutions to keep the government funded seven months into the fiscal year. H.R. 1473, the Department of Defense and Full-Year Continuing Appropriations Act, 2011, appropriated FY11 funds for the Transportation, Housing and Urban Development and Related Agencies (THUD) programs and the Agriculture, Rural Development, and Food and Drug Administration, and Related Agencies programs.
FY12 funding decisions proved easier for Congress and it passed the two affordable housing spending bills, the THUD bill and the Agriculture bill, in a minibus appropriations bill, H.R. 2112. However, funds for the HOME Investment Partnerships program were cut deeply in FY12, following a series of articles in the Washington Post claiming the HOME program was poorly administered by HUD and that funds were mismanaged by grant recipients. In addition to cutting the program in order to achieve cost savings in the HUD appropriations bill, Congress included language in HUD’s FY12 appropriations bill requiring additional oversight for the HOME program.
During the development of the FY12 appropriations bills, Congress began grappling with long-term strategies to address the nation’s deficit. Congress passed the Budget Control Act (BCA), S. 365, in 2011, which established a first round of deficit reduction measures, including mandating discretionary spending caps for ten years. The BCA handed over responsibility for identifying the second round of deficit reduction measures to a “Super Committee” of legislators from both sides of the aisle in both chambers. It also included a provision that required automatic spending cuts to discretionary programs, known as sequestration, to take effect in January 2013 if the Super Committee did not agree to a second deficit reduction plan. Consistent with the lack of consensus demonstrated in fiscal negotiations earlier in the 112th Congress, the Super Committee failed to reach agreement, setting the stage for the “fiscal cliff.”
Lawmakers plan to work on comprehensive tax reform in the 113th Congress. At the end of the 112th Congress, Members of the House and Senate committees with jurisdiction over tax issues began preliminary discussions of tax reform, but it is not clear when the 113th Congress will begin this work. Tax reform is central to the Administration’s and many Democrats’ argument that additional revenues are needed to address sequestration. However, sequestration will need to be addressed long before legislation as complicated as an overhaul of the tax code can be developed, much less acted on.
NLIHC will continue to monitor the ins and outs of these major implications for federal housing and other programs that provide assistance to low income people and notify advocates of need for action.