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2007 Capsule Summary FY 2008 Omnibus Appropriations bill (HR 2764), which consolidated eleven nondefense appropriations bills and includes partial war funding, passed Congress on December 19, 2007, and was signed into law today by President Bush. FY 2008 Defense Appropriations bill: (excluding war funding) was enacted November 13, 2007 (PL 110- 116). War Funding: The President requested $196 billion for war funding in FY 2008. The omnibus bill provides partial funding, $70 billion, without timetables or conditions. Outlook: another fight over war funding in spring of 2008. SCHIP Funding: The State Children's Health Insurance Program was extended until March 31, 2009, but without new funding to expand the program. Medicare Physician Payments: Congress included in the SCHIP extension a provision to postpone for 6 months a scheduled 10% cut in Medicare payments to physicians. AMT Patch: Congress enacted a one-year "AMT patch" preventing 21 million people from paying higher AMT rates when they file their 2007 tax returns. Democrats lacked sufficient votes to enact provisions that would have paid for the revenue losses. Tax Extenders: Congress did not pass a "tax extenders" bill, but may still act in early 2008 to apply some of the provisions retroactively to 2007. Farm Bill: Senate passed its version of HR 2419 on December 14, 2007; the House passed its version on July 27, 2007. House-Senate conference will begin when Congress reconvenes in January.
Today, December 26, 2007, President Bush signed into law an omnibus appropriations bill passed by Congress last week that consolidates 11 of the 12 regular appropriations bills. (The defense appropriations bill--excluding war funding--was enacted in November.) The President's veto threats on 9 of the 12 FY 2008 appropriations bills, ultimately forced Democrats to scale back the appropriations bills to fit within the $933 billion discretionary spending total requested by the President last February. [Context: The other two-thirds of the roughly $3 trillion Federal Budget is "mandatory spending," i.e. entitlement programs and interest on the public debt.] Democrats worked within the $933 billion discretionary spending total to align available funds with their desired priorities. Congressional appropriators also used "emergency spending"--not counted towards the $933 billion total-- to add to the veterans budget and other nondefense spending programs. Congress also yielded to the President's demand that war funding not include any timetables or other conditions. The omnibus bill includes $70 billion in funding for military operations in Iraq and Afghanistan. Due to the absence of a withdrawal timetable, only 78 Democrats in the House voted for the omnibus bill, while 141 voted against. For complete details, log-in to WBR' s Appropriations Tracker for bill language, joint explanatory statements for each bill (including comprehensive earmark lists), and committee summaries of each bill. In a press conference on Thursday, December 20, the President again focused attention on the number of congressional earmarks. Ironically, one headline to emerge from this year's appropriations process is that the new House and Senate earmark disclosure rules have made congressional earmarks far more transparent than in previous years, as well as fewer in number. Earmarks actually comprise a fraction of one percent of the total budget. Some view the amount of attention focused on earmarks as a red herring that distracts attention from the rapid build-up of debt since 2001. (The public debt has climbed from $5.8 trillion in 2001 to more than $9.1 trillion today.) There were some indications in the President's statement yesterday that he may be considering instructing government agencies to ignore congressional earmarks contained in the joint explanatory statements accompanying the omnibus appropriations bill. Legally this would be permissible since the explanatory statements do not become law. However, in 1987, then OMB Director Jim Miller, attempted to ignore earmarks contained in report language, causing a political firestorm. Congress views all earmarks, whether contained in legislative language, committee reports, or joint House-Senate explanatory statements to be a clear expression of congressional intent. A less confrontational option the President has is the authority to propose a package of "rescissions" of earmarks and other spending he disagrees with. Proposed rescissions become effective if they are enacted by Congress.
Background on AMT: The AMT was enacted in 1969 to preclude very wealthy individuals from escaping all tax liability due to tax loopholes. It operates as an alternative calculation of income tax liability which cancels out various deductions, exclusions, and tax preferences. Taxpayers are required to pay the higher of AMT tax liability and regular income tax liability. Upper-middle and middle-income taxpayers are increasingly vulnerable to the AMT for two reasons. First, while the regular income tax is indexed for inflation, the AMT is not. Second, recent income tax rate reductions have narrowed the differences between regular and AMT tax liabilities. Earlier this year, the Treasury Department projected that the number of taxpayers subject to the Alternative Minimum Tax in 2007 would jump from 4 million to 25 million without enactment of an AMT adjustment, often called a "patch." Democrats and Republicans were in agreement throughout the year that a patch should be enacted, but spent much of the year debating whether the approximately $50 billion in lost revenue to the Treasury should be offset by closing tax loopholes. The pay-as-you-go ("PAYGO") rules adopted by the House and Senate earlier this year require that all new revenue losses (or entitlement spending increases) be fully paid for, in order to avoid increasing the Public Debt. House Democrats, in particular the fiscally conservative "Blue Dogs," were determined to adhere to the new PAYGO rule. Earlier this month, the House passed an AMT patch that would have been paid for by including $24 billion from new limits on the ability of hedge fund managers to defer offshore compensation, and $25 billion from delaying new interest expense allocation rules that benefit multinational corporations. However, Senate Republicans threatened to filibuster the offsets, viewing them as "tax increases." Ultimately, faced with a choice of providing AMT relief, or waiving the PAYGO requirement, House Democrats relented and opted to pass the AMT patch without offsets. (HR 3996) With Senate Republicans effectively using the threat of filibuster to force a waiver of the PAYGO requirement, House Democrats are openly talking about using the Budget Reconciliation process next year to overcome the filibuster. Budget Reconciliation is an expedited procedure that protects budgetary legislation from filibusters and nongermane amendments. Republicans successfully used Budget Reconciliation earlier this decade to pass President Bush's tax cuts.
Status: Congress did not pass an "extenders bill" in 2007. "Tax extenders" are provisions, originally enacted with expiration dates that were subsequently extended--in some cases several times; and most recently were scheduled to expire by December 31, 2007. Congress failed to extend the provisions due to disagreements over whether to pay for the associated revenue losses, with Democrats generally favoring offsets and Republicans generally opposing offsetting provisions. Outlook: Congress may extend at least some of the expired provisions retroactively in 2008. The "extenders" refer to tax credits including: the Work Opportunity Tax Credit (WOTC), the Welfare-to-Work Tax Credit (WWTC), and the research and experimentation (usually called the R&D) credit; deductions including elementary and secondary school teachers, tuition expenses, mortgage insurance premiums, corporate charitable contributions of computer technology, food inventory, and books, contributions of capital gain real property made for conservation, and state and local sales taxes; and other provisions including an excise tax to induce parity in the application of certain mental health benefits, penalty-free withdrawals from individual retirement plans (IRAs) for individuals called to active duty or for charitable giving, and mortgage revenue bonds for veterans. SCHIP Extended, but not Expanded After two presidential vetoes of bipartisan legislation to expand State Children's Health Insurance Program (SCHIP) funding to increase beneficiaries from 6 million to 10 million, Congress yielded to the President and passed a simple extension of the current program (S 2499) through March 31, 2009. [Context: The congressional SCHIP bill would have reauthorized the program and increased Federal funding by $35 billion over 5 years ($30 billion more than the President's request) in order to boost coverage. SCHIP was established in 1997 and provides health coverage to children in families whose incomes are low, but somewhat higher than Medicaid's very tight income eligibility limits. The program operates similar to Medicaid with Federal reimbursements for a percentage of State expenditures to provide health coverage for eligible children.] Medicare Physician Cuts Averted Congress also included in the SCHIP extension (S 2499) a provision to postpone for 6 months a scheduled 10% cut in Medicare payments to physicians. The scheduled cuts date back to the Balanced Budget Act of 1997 which sought to slow the growth of Medicare spending, in part, by scheduling cuts in payments to physicians. Opponents of the scheduled cuts have been concerned that allowing them to go into effect would result in fewer physicians willing to treat Medicare patients. Under the temporary provision, Medicare will increase physician payments by 0.5 percent for the first 6 months of 2008, but without additional action the scheduled cuts will spring back next July. Recent Budget-Related Docs Congress: See WBR' s Appropriations Tracker and Tax Tracker for links to year-end legislation |
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| Charles S. Konigsberg, President | (202) 587-2984 (ph) | (202) 587-2983 (fax) | ckonigsberg@federalbudgetgroup.com | |
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