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Budget 101

Politics | With the House and the Senate sparring over spending, here's a primer on what's happening with the budget on Capitol Hill

Issue: "Upside down," April 9, 2011

WASHINGTON-With such a large number of first-time lawmakers in Congress, Budget Committee Chairman Paul Ryan has been conducting budget boot camps. The sessions include PowerPoint slides that chart the tidal wave of debt facing the nation. Call it budget for dummies, although the lawmaker from your district probably won't appreciate that.

Most Americans would do well to sit in on the sessions: In a recent poll asking what percentage of the federal budget goes to foreign aid, the average response was 27 percent. Wrong. It is about 1 percent. Since 2011 is shaping up to be a year of budget battles, WORLD provides below (and in the next issue) our own budget class-but we will call it Budget 101:

How bad is the problem?

This year the national debt-the amount the U.S. government owes-topped $14 trillion. It took just seven months for the debt to go from $13 trillion to $14 trillion. Anyone with a credit card knows that higher debt means higher interest payments. By the end of this decade our government's annual interest payments will nearly reach $800 billion-more than all current discretionary spending combined.

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The Congressional Budget Office estimates our country's annual deficit, the amount the government spends beyond what it takes in each year, will be a record $1.5 trillion for 2011. Federal spending per household has jumped from $25,000 to $31,000 since 2008 and is on a path to approach $40,000 by the end of the decade. Under President Barack Obama, discretionary spending has increased 16 percent while the national debt has skyrocketed 43 percent.

Why has it gotten so bad so fast?

The recession combined with the federal stimulus and bailouts have accelerated the slide, but we've been heading down this dark road for some time. Both parties have succumbed to big spending binges in recent years, and the number of federal subsidy programs has doubled since the 1980s, according to Chris Edwards with the Cato Institute. "This is dangerous for a democracy," he says. "This top-down, bureaucratic society is alien to American traditions. People lose their independence." Expensive wars have also impacted the budget, but entitlements (which we'll cover in detail in the next issue) have been the main contributors to the deficit. Social Security, Medicare, and Medicaid now make up more than 60 percent of the budget.

What is a CR and why does Congress keep passing them?

CR stands for Continuing Resolution, and it is something Congress has had to pass six times to keep the government running for the 2011 fiscal year that began back on Oct. 1. Last year's Congress never approved a federal budget and never passed any of the 12 spending bills that cover federal discretionary spending. That's the first time both of those have not happened in the same year since the 1974 Budget Act. "Democrats were too busy doing healthcare," explains Brian Riedl, budget analyst with the Heritage Foundation.

More than one stopgap measure has been needed because Republicans and Democrats are more than $50 billion apart in how much money to cut. Democrats propose cutting $4.7 billion in spending, which amounts to what the government borrows about every 30 hours. While GOP leaders initially set a target of $32 billion in cuts, pressure from new lawmakers deepened those cuts to more than $60 billion.

Are these CRs cutting money?

Lawmakers have agreed to chop $2 billion a week from the federal budget for each of the recent CRs. The total of $10 billion in approved cuts are the largest cuts since 1995.

But many conservatives have grown impatient over the Democrats' slow retreat, and 54 Republicans voted against the latest CR that funds the government until April 8. Many freshman lawmakers campaigned to get to Washington by promising to change the way Washington works, and repeated stopgaps do not deliver on that promise.

Social conservatives are upset because the temporary measures do not include defunding of Planned Parenthood and the Corporation for Public Broadcasting, measures that passed the House. Most of the approved cuts have been easy ones: Nearly a third of the recent $6 billion slice came from rescinding money that was not used for the 2010 census.

"Despite the seriousness of this debt crisis," said freshman Sen. Marco Rubio, R-Fla., "an absurd pattern has clearly developed in Washington."

Why is this debate considered just Round 1 of the spending showdown?

Conservative lawmakers believe now is the time to pick a fiscal fight. Congress faces two more budget battles this year. In addition to authorizing spending for the next fiscal year (2012), Congress must face a much-discussed vote on raising the debt ceiling. This ceiling sets the legal limits on how much the federal government can borrow. The government is on course to hit the current limit of $14.3 trillion by late spring. If Congress does not increase the debt ceiling, the government would have to stop borrowing, a prospect economists call catastrophic.

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