News from Rapoza Associates                                                                               December 20, 2010

Congress Ducks and Punts Spending Bill to New Members

Yesterday Congress made clear its intention to pass a Continuing Resolution (CR) through March 4, 2011 that will add just over $1 billion to the current year’s budget in order to boost spending for a few key programs like the Veterans’ Benefits Administration and to keep fees reduced on small business loans. The March date ensures that the newly elected members of the 112th Congress will be sworn in, and it will likely come on the heels of the release of the Fiscal Year 2012 budget which we expect out the first week in Feburary. That timing could serve the interests of the new class of Representatives in the House who campaigned on an anti-government spending platform and will be looking for programs to hack away at in their first budget.

Congressional Republicans have promised to reduce domestic spending by $80 billion or 22%; equal to the FY 2008 rate. Some estimates indicate that approximately $16 billion is available in unspent appropriations from the Recovery Act. Presumably, the balance will come from other, domestic discretionary accounts. In the past, Congress has never reduced discretionary spending by more than 5% two years in a row.

Congress returns on January 5.  It is likely that the new majority in the House will begin mark-up of a spending bill for the balance of FY 2011 by mid-February with the aim of completing action by the end of the current CR – March 4.  After that, the Appropriations Committee will immediately turn to the FY 2012 budget.

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