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Preliminary Analysis of “Budget Control Act”

August 2, 2011

The Alliance for a Stronger FDA has carried out a preliminary analysis of the “Budget Control Act of 2011.”

By agreeing upon a process for reducing the federal budget, the debt ceiling limitation will be allowed to increase to cover the nation’s borrowing needs until after the 2012 elections.

The deficit reduction plan has two parts: (1) discretionary spending caps and (2) federal deficit reduction requirements.  It is important to note that the federal deficit reduction measures could cause discretionary spending to be even lower than the cap.

(1) $917 billion in cumulative spending reductions in discretionary programs over a 10-year period. To assure this amount of savings, total appropriated spending is capped for each year, starting with FY 12. Reductions will be divided between cuts in security programs (defense, homeland security, VA) and non-security programs (education,  health, environment, housing, etc.).

According to the CG Roll Call Daily Briefing on Monday, the FY 12 ceiling is “about $24 billion more than the House has been working toward.” This allows Congress to consider FY 12 appropriations bills that are larger than the House has passed so far. We expect the Senate to take up individual spending bills in September and this will be part of their considerations.

While this is a better situation for FDA for FY 12 than a week ago, it is still quite difficult. The House passed bill proposes to cut FDA by $284 million below the FY 11 funding level and 21% below the President’s request.

(2) At least $1.2 trillion in cumulative reductions in the federal deficit over a 10-year period. A 12-member Congressional “super committee” is to be formed — with three members each party and each House. By November 23, 2011 they are required to produce a plan that will achieve at least $1.2 trillion in 10-year savings. This can be accomplished by further discretionary cuts, entitlement changes, and/or revenue enhancers. Both House and Senate would be required to vote on the plan by December 23, 2011.

Practically, there is not enough discretionary spending to achieve the $1.2 trillion level, so entitlement cuts and revenue enhancers will have to be included. The more entitlement cuts and revenue enhancers, the less pressure on overall discretionary programs, such as FDA. However, discretionary cuts are likely to be in the final package.  Therefore, the Alliance will have to be active in this fast moving process.

Should the committee fail to create a plan or the plan fails to pass both houses or the President vetoes the plan, then across-the-board (ATB) cuts (“sequestration”) would take effect on October 1, 2012 (the first day of FY 13). However, the depth and breadth of such cuts across the entire government are so harsh that there will be considerable pressure on the Congressional super-committee to find agreement on the $1.2 trillion deficit reduction package.

We plan to cover the implication of these changes in greater depth in our normal “analysis and commentary” report on Friday, August 5.

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