A guest blog by Seth Barnett, PPAI Government Relations Manager
This month the House and Senate began debating the many variations of the FY 2016 budget proposals. Though there are billions of dollars in variants and hundreds of proposed changes to balance the budget, the commonality in these is a strategic approach to ensuring economic growth, middle class opportunity and a reduced deficit. Members of Congress are pushing for the first balanced budget since the Clinton administration and have said they believe that, for the first time in many years, an agreed-upon plan is likely. The Congressional Budget Office, the Office of Management and Budget, and the President agree that in order for any of the proposals to have validity, it will have to ensure bipartisan support with special attention to deficit reduction. It is now up to the new Congress to create compromise that ensures economic stability.
In 2014 the U.S. GDP grew more than it had since 2010, helping the economy to somewhat resemble the prosperous late 1990s. In addition, the world economy is doing better as a whole, contributing to American opportunity. Due to the higher-than-projected year by the European Central Bank, Europe has increased its estimated economic growth from 1% to 1.5%. This small adjustment could mean than in just a few years Europe will be back to its own pre-2008 economic levels. Europe’s powerhouses–Germany, the United Kingdom and France–remain economically more stable than over half of the EU. Still, the U.S. economy thrives when Europe does as we are their largest export partner and third largest import partner. In order to keep this relationship constant, the U.S. will need a long-term growth plan for economic success.
The most significant threat to economic opportunity at this point comes down to the critical budget proposals. On May 15 last year, the U.S. reached its debt ceiling but avoided an immediate shutdown. Thanks to some clever accounting by the Treasury Department, the U.S. will not run out of money until sometime around October 1. If this limit is reached without a balanced budget or without a continuing resolution we could experience another government shutdown. When the government closed for 16 days in 2013, it is estimated that the U.S. lost .3% of its estimated growth. Another blow like that could set our GDP back even further.
The House- led Rules Committee has struggled to come to the table with a cooperative budget plan. Earlier last week they announced that there would be two unique votes on the current budget proposals. One budget proposal would have defense levels at a specific point while the other would slightly modify those levels. The House and Senate passed budget resolutions last week just before recessing for the two week holiday. The deficit is the most significant difference between the President’s budget proposal and the plans passed in Congress. The President’s plan would maintain current debt levels over a period of ten years before then beginning to drop off whereas the Congressional plan would slightly reduce deficit over the same time period. The interesting component of the budget plans is that they each allow for a similar reduction over FY 2016.
Congress will continue to strive for a balanced budget with all sides winning. However, it will be up to steady compromise to ensure the budget is agreed upon in time and without economic causality.
To read more from PPAI LAW, see this month’s GR Today.