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It’s Not a “Normal” Year … And So …

June 28, 2012

Note: The following “Analysis and Commentary” was originally distributed to Alliance members on Friday, June 22, 2012. Distribution on this web site was delayed by the vacation of the sitemaster.

Next week, the House should lock down their position on Ag-FDA appropriations for FY 13. We expect that the Committee position of –$16.3 million will stand, barring an unexpected managers’ amendment to add monies for food safety. The barrier to an amendment is that monies would have to be found elsewhere in the Ag-FDA bill that could be cut in order to offset the increase.

If this was a normal year, the Senate would then move its committee bill (+$24 million above FY 12) to the Senate floor in July. Then staff would work on compromise numbers in August and a final bill would then pass in September. The expected range would be somewhere between –$16M and +$24 million relative to FY 12 … although, twice in the past 5 years, FDA has received an increase slightly larger than the higher bill. This could happen again this year, especially since the lower House number for FDA is predicated on a House budget resolution that is billions lower than the number the Senate was working with

Of course, this is not a normal year. This is a Presidential election year; it is unclear whether the Democrats can hold the Senate, and there is a small chance the Democrats may threaten Republican control of the House. We have a trillion dollar (plus) annual budget deficit and a federal borrowing cap that will have to be increased early next year. Finally, in an attempt to force deficit reduction, the law calls for a sequestration (across-the-board spending cut) of about 8% scheduled to take place on January 3, 2013. Also, the Bush-era tax cuts expire at the end of this year and the extent to which they are extended also impacts government revenue and deficit reduction.

For those reasons (and many more), the conventional wisdom is that the House will continue to adopt appropriations bills, but that the Senate will not move any bills out of committee. There would then need to be a continuing resolution (CR) to fund government activities for FY 13 (when it starts on October 1, 2012). Over the last few years, most government programs have been funded at their prior year level under the CRs that have passed. However, with the possibility of a sequestration occurring in early January, Congress may decide to force agencies to spend less in October, November and December — perhaps by setting the CR level at FY 12 minus 8%.

This would then force a budget show-down after the election — in a lame-duck session that might stretch from mid-November (at the earliest) to January 2 (at the very latest). In most election cycles, lame duck session are usually much shorter — 3 to 4 weeks. However, even using the maximum amount of time available, Congress will have to figure out compromises on deficit reduction in fairly quick order. The problem, which I have dubbed “the iron triangle of deficit reduction,” hasn’t changed since Congress first started deadlocking on these issues 18 months ago.

Specifically — there are only three ways to generate savings/achieve significant deficit reduction: cut discretionary spending, make changes in mandatory and entitlement programs and/or find ways to raise additional income for the government. The sticking point is that Democrats want a balance of entitlement changes and tax increases, while Republicans will not accept any tax increases.

Meantime, sequestration serves as a hammer to the process — since almost all of the cuts would come from discretionary spending programs. This means FDA might sustain a large cut in January, unless we can successfully argue for the agency to be exempt. We will be making that argument against the backdrop of the larger argument that will be debated: discretionary spending, in the aggregate, is not large enough to close the budget deficit. Anything that could be considered a solution must involve either entitlements or taxes or both.

For the most part, Congress has been kicking the can (of deficit reduction) down the road for the last 18 months. Whether they will act late in the year, allow the sequestration to go into effect, or again postpone action is unknown … and will probably be heavily impacted by the election results.

Note: This analysis and commentary is written by Steven Grossman, the Deputy Executive Director of the Alliance for a Stronger FDA.

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