Report to the Chairman

1

• Report to the Chairman
• On the
• 108th Congress, 1st Session

2
1st Session Overview

• Big Changes
• New Majority Leader
• New Budget Committee Chairman
• Seven new majority Budget Committee members
• Deteriorating fiscal situation
• Deficits rising due to slumping economy,
  expensive war on terrorism, and investments in
  homeland security.
• After hitting 2.0 trillion in 2000, federal
  revenues fell for three straight years to 1.8
  trillion in 2003.
• Unfinished business
• Spent nearly a month (Jan 15 to Feb 13)
  completing work on eleven unfinished 2003
  appropriations bills.
• Completed Budget Resolution in near-record time
• Received Presidents budget on February 3
• Received CBO re-estimate on March 7
• Reported S.Con.Res. 23 on March 15
• Passed S.Con.Res. 23 on March 26
• Passed H.Con.Res. 95 on April 11

3
2004 Budget Resolution Recap

• Senate Budget Committee hearings 8
• Amendments considered in Committee mark-up 32
• Amendments considered on the Senate floor 81
• Days of Senate floor consideration 8
• Days of vote-a-rama 3
• Vote on conference agreement 51-50 (VP voted
  aye)
• Total spending in 2004 2.3 trillion
• Total spending over 10 years 28.1 trillion
• Total revenue in 2004 1.9 trillion
• Total revenue over 10 years 26.7 trillion
• Budget balanced by 2012.

4
The Economy

• THEN
• Payroll jobs were declining, oil prices were
  rising, GDP growth was slowing, and consumer
  confidence was waning. The risk of a second
  economic downturn was a very real concern at the
  beginning of 2003.
• The economic outlook was further clouded by a
  potential war in Iraq and the specter of
  deflation. Most economists agreed that the
  downside risks to economic growth far outweighed
  the possibility of an unexpected increase.
• NOW
• Real GDP increased at an 8.2 percent annualized
  pace in the third quarter of 2003, registering
  the fastest rate of growth in two decades.
• The current Blue Chip consensus forecast for real
  GDP growth in 2004 is 4.6, one percentage point
  higher than its forecast a year ago.
• The combined market capitalization of the NYSE
  and the NASDAQ increased 35 percent from 11.1
  trillion to 15.1 trillion from February 2003 to
  December 2003.
• Over the last five months, the economy created
  more than a quarter of a million new jobs.

5
Discretionary Spending

• Even though the Budget Resolution passed prior to
  the April 15 deadline, both the House and Senate
  Appropriations Committees waited two months
  before moving appropriation bills.
• This delay and other difficulties resulted in
  adjournment in 2003 without enactment of seven of
  the thirteen regular appropriations bills.
• With enactment of the Omnibus, total
  discretionary spending for the year will end up
  just under 3 percent higher than last year,
  factoring in supplementals in both 2003 and 2004.
• Not including supplementals in either year, total
  discretionary spending will rise at about the
  rate envisioned by the Budget Resolution - 2.3
  percent.
• However, nondefense spending grew substantially
  more than the Presidents request, mostly at the
  expense of the defense budget.

6
Discretionary Spending Growth Budget Authority in
Billions of Dollars TOTAL APPROPRIATIONS
(including 2003 2004 supplementals) 2003 2004
Change Defense 454.9 459.9 1.1 Nondefense 39
4.2 413.6 4.9 TOTAL 849.2 873.5 2.9 REGULA
R APPROPRIATIONS (excluding 2003 2004
supplementals) 2003 2004 Change Defense 392.1
394.7 0.6 Nondefense 375.9 391.3 4.1 TOTAL
768.1 785.9 2.3
7
Non-Defense, Non-Homeland SpendingMuch Higher
than Presidents RequestBudget Authority in
Billions
1.8 billion rescission of defense for nondefense
(in Omnibus)
3 billion shift from defense to nondefense (June
12 WH appropriations agreement)
2.2 billion shift of advances from 2004 to 2003
(June 12 WH appropriations agreement)
8
Mandatory Spending
The Budget Resolution provided for 497 billion
in net new mandatory spending from 2003-2013, the
large majority of which was dedicated to
Medicare. Congress approved slightly less in new
mandatory spending than was budgeted over the
2003-2013 period, however spending increases in
2003 and 2004 exceeded the Budget Resolutions
assumptions. Congress also approved large
spending increases for veterans concurrent
receipt (40 billion), aid to states (20
billion), and unemployment insurance (8 billion)
that were not included in the Budget
Resolution. The Budget Resolutions most
significant proposal to reduce mandatory spending
-- medical malpractice reform (-15 billion) --
was not enacted.

• Billions of Dollars Budgeted Spent
• Medicare 400 395
• Uninsured 50 0
• Growth package outlays 27 10
• EGTRRA permanence outlays 22 0
• State Aid 0 20
• Veterans concurrent receipt 0 40
• Unemployment insurance 0 8
• Medical malpractice reform - 15 0
• Customs User Fees - 18 - 2
• All other 31 10
• TOTAL MANDATORY SPENDING 497 481

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Tax Cuts

• The Budget Resolution provided for 1.2 trillion
  in tax relief over eleven years.
• Congress only enacted 322 billion in tax cuts,
  almost all of which was attributable to the Jobs
  Growth Tax Relief Reconciliation Act.
• Other major tax relief initiatives, such as
  permanent extension of the 2001 Bush tax cut,
  were not considered.
• The conference agreement on the Energy Policy
  Act, which was subject to a filibuster in the
  Senate as the year concluded, would have added
  23.5 billion in tax cuts to that total.

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12
Budget Enforcement

• The Budget Resolution restored and strengthened
  budget discipline by establishing
• Enforceable caps on discretionary spending for
  2003, 2004, and 2005,
• Limits on advance and non-defense emergency
  appropriations, and
• A pay-as-you-go point of order against mandatory
  spending increases or revenue decreases in excess
  of the budget.
• After Congress approved the 2004 Budget
  Resolution, the Senate voted 61 times on motions
  to waive the Budget Act.
• The motion to waive was agreed to on only two
  occasions and only one of those waivers was for
  increased spending.
• Of the 61 points of order raised, over half (35)
  occurred during debate on appropriations bills,
  saving taxpayers more than 800 billion over ten
  years.

13
Other Budget Oversight Activities

• SBC majority staff reviewed the budget impact of
  nearly every bill and resolution placed on the
  Senate calendar.
• A budget-impact Senate Calendar was provided on
  a regular basis to leadership and cloakroom staff
  providing guidance on the more than 200 bills
  with a direct spending or revenue impact.
• The majority staff also continued to produce the
  Budget Bulletin, a semi-weekly analysis and
  commentary on timely budget and fiscal issues.
• Twenty-three issues of the Bulletin containing
  about 75 articles were circulated to hundreds of
  individuals and posted on the committee website.
• (http//budget.senate.gov/republican/)

14
Outlook for the 2nd Session

• Big deficits, looming entitlement crunch,
  significant uncertainties (War on Terrorism)
• Presidential politics
• Challenging timetable
• Presidential nominating conventions extend the
  summer recess by two additional weeks,
  compressing the amount of time available to
  process appropriations bills.
• Early spring recess (March 15-19) falls in the
  middle of the budget process.
• Popular, but expensive, legislation
• Highway bill