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Congress to Tackle Debt Ceiling and Federal Budget After Spring Recess

April 20, 2011

Congress is currently on a two-week spring recess and will return to Washington on Monday, May 2. Before leaving Capitol Hill, the House of Representatives approved the FY12 budget resolution (H. Con. Res. 34) that was developed by House Budget Committee Chairman Paul Ryan (R-WI). The vote was 235 to 193 on a near party-line vote, with no support from Democrats.

As reported in the April 11, 2011 E-Bulletin, the FY12 House plan, “The Path to Prosperity: Restoring America’s Promise,” proposes significant scaling back and modifications to the Pell grant program.

In an April 14 letter to all members of the House of Representatives, the Student Aid Alliance, of which NACUBO is a member, expressed its opposition to the student aid cuts in the budget resolution and stated, “It is pennywise and pound-foolish not to support the nearly 10 million Americans who choose to earn their way out of poverty by going to college using a Pell Grant.”

At George Washington University on April 13, President Obama presented an outline for his plan to reduce the budget deficit by $4 trillion in twelve years or less. The president calls for comprehensive tax and mandatory spending reform, but like the House Republican plan, he avoids proposing any major changes to Social Security.

Negotiations are set to begin through a bipartisan working group on a deficit-reduction deal at the request of President Obama when Congress returns to Washington next week. At the President’s request, Vice President Biden will lead the group that will also include appointees selected by congressional leaders.

House Democratic Leader Nancy Pelosi (CA) appointed Assistant Democratic Leader James Clyburn (SC) and Rep. Chris Van Hollen (D-MD) to represent House Democrats, while Senate Democratic Leader Harry Reid (NV) selected Finance Committee Chairman Max Baucus (D-MT) and Appropriations Committee Chairman Daniel Inouye (D-HI) to represent Senate Democrats. Republicans have selected only Senate Minority Whip Jon Kyl of Arizona and House Majority Leader Eric Cantor of Virginia to participate in the May 5 meeting.

Obama has requested a proposal from the working group by June in order to coincide with the timing of a necessary vote to raise the debt limit, the legal limit on borrowing by the federal government. Earlier this month, Treasury Secretary Timothy F. Geithner reported that the $14.3 trillion debt limit would be reached no later than May 16, and that Treasury would be able to take various “extraordinary” accounting measures to prevent default only until about July 8. If the ceiling is not raised, the federal government could be forced into default, which both parties agree would lead to significant, and possibly disastrous, economic consequences. On Monday, April 18, Standard & Poor’s changed its outlook on the United States from “stable” to “negative”.

Like the negotiations over the final FY11 budget, which brought the federal government to the brink of a shutdown, the battle to get to a vote on the debt limit is expected to be bruising. The nation is concerned about the current deficit, but there is little public support for any of the proposed solutions—from tax increases to modest changes in Medicare and Social Security. Because signs of economic recovery are fragile at best, and the fact that the U.S has never before defaulted on its debt, lawmakers generally agree that they must approve raising the ceiling. However, their votes will be conditional on the terms of any new spending caps, tax policies, restructuring of mandatory spending, and budget process reforms.

For more on the debt limit:

Washington Post, Tuesday, April 19, 2011
What’s the debt ceiling and why is everyone talking about it?

Contact

Liz Clark
Director, Congressional Relations
202.861.2553
E-mail