New year, no federal budget

NEW YORK (CNNMoney.com) -- On Oct. 1, just three weeks after lawmakers return from their summer break on Tuesday, fiscal year 2011 will begin. But Congress will not have a new budget in place by then. And it may not materialize anytime soon.

It won't be the first time. In fact, tardy federal budgets have been par for the course for most of the past 35 years.

"It's pretty inexcusable even though we excuse it every year. There's no reason on earth why [lawmakers] shouldn't be able to make up their minds before the start of the fiscal year," said Rudolph Penner, a former Congressional Budget Office director who is now public policy scholar at at the Urban Institute.

Without a formal budget, Congress typically ends up passing so-called "continuing resolutions" for a month or two at a time. That essentially prevents the federal government from shutting down while lawmakers finalize how money will be allocated in the fiscal new year.

The CR authorizes the heads of government agencies to obligate money they need to spend to carry out their agencies' work, whether through signing contracts, making purchases or hiring people.

It's hardly optimal, however. "It has implications for good government. Civil servants can't do their work very efficiently. It's hard to do rational planning," Penner said.
Given the poisonous partisanship that has dominated this mid-term election year, it's easy to wonder if they can even pass a continuing resolution. If they don't, a government shutdown is a real possibility. But Penner believes that is unlikely because it would be deeply unpopular and both parties could suffer politically.
By the same token, Penner can envision a scenario where Congress doesn't finalize a formal budget until sometime after January. If the Republicans win the majority in the House, they may be unwilling to pass anything until they take over, he said.

Why this year is different

While it's not unusual for Congress to ring in the new year budget-free, there's a somewhat new twist in the old procrastination dance this year.
That's because neither the House nor the Senate have even passed a formal budget resolution, which typically is done in the spring before the appropriations committees decide how to allocate federal funds.
The budget resolution sets caps for spending, establishes revenue targets and generally serves as a five- to 10-year blueprint of congressional priorities for the appropriations and tax committees to follow.
Nonetheless, it's not like no work has been on a budget. To date, the House has passed two of the 12 appropriations bills for 2011. The Senate hasn't passed any, but a number have been passed by the subcommittees charged with running the purse strings for different areas of the government, such as education and defense.
But it's a long way from the finish line for legislators. And there is still no consensus within or between the House and Senate on what the specific cap should be on discretionary spending for next year, although they are working within a range of $1.114 trillion to $1.121 trillion, and there's a push to move those levels down to $1.108 trillion.
All told, the CBO estimates that the 2011 budget will total $3.7 trillion based on policies that were in place this summer. A little less than a third of that would go to discretionary spending and the rest would go to entitlement programs such as Medicare and interest on the country's debt.

Long-term debt: The real problem

And that debt is the elephant in the room in all budget discussions.
There may be a wait-and-see attitude at play, since the president's bipartisan fiscal commission will release its recommendations for reining in the debt on Dec. 1, and if any of its suggestions are adopted, that will change any budget plans on tap.
But even if lawmakers could agree on a comparatively modest budget, lawmakers would need to detail how it would affect the country's debt over the next decade. And the debt picture would be ugly no matter what. So voting on that budget would be a political downer right before an election when everyone is trying to show how fiscally irresponsible the other guy is.
"No one wants to spell out what they would do given that the choices are humongous deficits or tough policy choices, all in an incredibly tense election year," said Maya MacGuineas, president of the bipartisan Committee for a Responsible Federal Budget. "The budget never really had a chance. And another sad truth -- most of the public will never even notice."

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