# Presentation: 051152

## Report to the Chairman

On the

108th Congress, 1st Session

**On the**
**108****th**** Congress, 1****st**** Session**

## 1st Session Overview

- Big Changes
- New Majority Leader
- New Budget Committee Chairman
- Seven new majority Budget Committee members
- Deteriorating fiscal situation
- Deficits rising due to slumping economy, expensive war on terrorism, and investments in homeland security.
- After hitting $2.0 trillion in 2000, federal revenues fell for three straight years to $1.8 trillion in 2003.
- Unfinished business
- Spent nearly a month (Jan 15 to Feb 13) completing work on eleven unfinished 2003 appropriations bills.
- Completed Budget Resolution in near-record time
- Received President’s budget on February 3
- Received CBO re-estimate on March 7
- Reported S.Con.Res. 23 on March 15
- Passed S.Con.Res. 23 on March 26
- Passed H.Con.Res. 95 on April 11

- Senator Don Nickles, Chairman

## 2004 Budget Resolution Recap

- Senate Budget Committee hearings		8
- Amendments considered in Committee mark-up	32
- Amendments considered on the Senate floor	81
- Days of Senate floor consideration		8
- Days of vote-a-rama 				3
- Vote on conference agreement			51-50 (VP voted aye)
- Total spending in 2004				$  2.3 trillion
- Total spending over 10 years			$28.1 trillion
- Total revenue in 2004				$  1.9 trillion
- Total revenue over 10 years			$26.7 trillion
- Budget balanced by 2012.

- Senator Don Nickles, Chairman

## The Economy

**THEN**
- Payroll jobs were declining, oil prices were rising, GDP growth was slowing, and consumer confidence was waning. The risk of a second economic downturn was a very real concern at the beginning of 2003.
- The economic outlook was further clouded by a potential war in Iraq and the specter of deflation.  Most economists agreed that the downside risks to economic growth far outweighed the possibility of an unexpected increase.
**NOW**
- Real GDP increased at an 8.2 percent annualized pace in the third quarter of 2003, registering the fastest rate of growth in two decades.
- The current Blue Chip consensus forecast for real GDP growth in 2004 is 4.6%, one percentage point higher than its forecast a year ago.
- The combined market capitalization of the NYSE and the NASDAQ increased 35 percent from $11.1 trillion to $15.1 trillion from February 2003 to December 2003.
- Over the last five months, the economy created more than a quarter of a million new jobs.

- Senator Don Nickles, Chairman

## Discretionary Spending

- Even though the Budget Resolution passed prior to the April 15 deadline, both the House and Senate Appropriations Committees waited two months before moving appropriation bills.
- This delay and other difficulties resulted in adjournment in 2003 without enactment of seven of the thirteen regular appropriations bills.
- With enactment of the Omnibus, total discretionary spending for the year will end up just under 3 percent higher than last year, factoring in supplementals in both 2003 and 2004.
- Not including supplementals in either year, total discretionary spending will rise at about the rate envisioned by the Budget Resolution - 2.3 percent.
- However, nondefense spending grew substantially more than the President’s request, mostly at the expense of the defense budget.

- Senator Don Nickles, Chairman

## Discretionary Spending Growth

**Budget Authority in Billions of Dollars**
- TOTAL APPROPRIATIONS (including 2003 & 2004 supplementals)
- 		_2003_		_2004_		_Change_
- Defense		454.9		459.9		1.1%
- _Nondefense__	__394.2__	__	__413.6__	__	__4.9%_
- TOTAL		849.2		873.5		2.9%
- REGULAR APPROPRIATIONS (excluding 2003 & 2004 supplementals)
- 		_2003_		_2004_		_Change_
- Defense		392.1		394.7		0.6%
- _Nondefense__	__375.9__	__	__391.3__	__	__4.1%_
- TOTAL		768.1		785.9		2.3%

- Senator Don Nickles, Chairman

## Non-Defense, Non-Homeland SpendingMuch Higher than President’s RequestBudget Authority in Billions

- $2.2 billion shift of advances from 2004 to 2003  (June 12 WH appropriations agreement)

- $3 billion shift from defense to nondefense (June 12 WH appropriations agreement)

- $1.8 billion rescission of defense for nondefense (in Omnibus)

- Senator Don Nickles, Chairman

## Mandatory Spending

- _Billions of Dollars_			_Budgeted_		_Spent_
- Medicare				+400  		+395
- Uninsured				+  50		      0
- Growth package outlays  		+  27		+  10
- EGTRRA permanence outlays		+  22 		      0
- State Aid				      0		+  20
- Veterans concurrent receipt		      0		+  40
- Unemployment insurance		      0		+    8
- Medical malpractice reform		-   15		      0
- Customs User Fees			-   18		-     2
- _All other__	__	__	__	__+  31__	__	__+  10_
- TOTAL MANDATORY SPENDING	+497		+481

- The Budget Resolution provided for $497 billion in net new mandatory spending from 2003-2013, the large majority of which was dedicated to Medicare.
- Congress approved slightly less in new mandatory spending than was budgeted over the 2003-2013 period, however spending increases in 2003 and 2004 exceeded the Budget Resolution’s assumptions.
- Congress also approved large spending increases for veterans concurrent receipt ($40 billion), aid to states ($20 billion), and unemployment insurance ($8 billion) that were not included in the Budget Resolution.
- The Budget Resolution’s most significant proposal to reduce mandatory spending -- medical malpractice reform ($-15 billion) -- was not enacted.

- Senator Don Nickles, Chairman

## Slide 9

- Senator Don Nickles, Chairman

## Tax Cuts

- The Budget Resolution provided for $1.2 trillion in tax relief over eleven years.
- Congress only enacted $322 billion in tax cuts, almost all of which was attributable to the Jobs & Growth Tax Relief Reconciliation Act.
- Other major tax relief initiatives, such as permanent extension of the 2001 Bush tax cut, were not considered.
- The conference agreement on the Energy Policy Act, which was subject to a filibuster in the Senate as the year concluded, would have added $23.5 billion in tax cuts to that total.

- Senator Don Nickles, Chairman

## Slide 11

- Senator Don Nickles, Chairman

## Budget Enforcement

- The Budget Resolution restored and strengthened budget discipline by establishing...
- Enforceable caps on discretionary spending for 2003, 2004, and 2005,
- Limits on advance and non-defense emergency appropriations, and
- A pay-as-you-go point of order against mandatory spending increases or revenue decreases in excess of the budget.
- After Congress approved the 2004 Budget Resolution, the Senate voted 61 times on motions to waive the Budget Act.
- The motion to waive was agreed to on only two occasions – and only one of those waivers was for increased spending.
- Of the 61 points of order raised, over half (35) occurred during debate on appropriations bills, saving taxpayers more than $800 billion over ten years.

- Senator Don Nickles, Chairman

## Other Budget Oversight & Activities

- SBC majority staff reviewed the budget impact of nearly every bill and resolution placed on the Senate calendar.
- A budget-impact “Senate Calendar” was provided on a regular basis to leadership and cloakroom staff providing guidance on the more than 200 bills with a direct spending or revenue impact.
- The majority staff also continued to produce the *Budget Bulletin*, a semi-weekly analysis and commentary on timely budget and fiscal issues.
- Twenty-three issues of the *Bulletin* containing about 75** **articles** **were circulated to hundreds of individuals and posted on the committee website.
- (http://budget.senate.gov/republican/)

- Senator Don Nickles, Chairman

## Outlook for the 2nd Session

- Big deficits, looming entitlement crunch, & significant uncertainties (War on Terrorism)
- Presidential politics
- Challenging timetable
- Presidential nominating conventions extend the summer recess by two additional weeks, compressing the amount of time available to process appropriations bills.
- Early spring recess (March 15-19) falls in the middle of the budget process.
- Popular, but expensive, legislation
- Highway bill

- Senator Don Nickles, Chairman