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Legislative Update

FY 2010 Budget Overview

On May 11th, the Administration released the remaining details of its FY 2010 budget request. Economic assumptions will not be revised from the Administration's February estimates until the July review.  However, the new budget documents reflect worsening deficit estimates, which now stand at $1.841 trillion for FY 2009 ($89 billion more than February) and $1.258 trillion for FY 2010 ($87 billion more than February).  Below are highlights from the FY 2010 Budget:

  • The budget proposes $3.6 trillion in outlays and $2.3 trillion in revenues, with an FY 2010 deficit of $1.258 trillion.  The budget includes deficit reduction from reducing war costs; allowing tax cuts for high income earners to expire; and closing corporate loopholes. At the same time, the budget proposes to invest heavily in health care, energy, and education initiatives. 
  • Based on the  projections of 3.2% growth next year, the projected deficits would be "cut in half" over the next four years from more than a trillion dollars at the start of the Administration to $512 billion by FY 2013.  At that level, the deficit would be equivalent to 2.9% of GDP.  
  • For taxpayers with incomes over $250,000, the previous administrations tax cuts would be allowed to expire. The top rate would jump from 35% to 39.6%; the tax on capital gains would jump from 15% to 20%, and the tax on estates worth more than $3.5 million would be taxed at the current rate of 45%. These provisions would generate more than $600 billion in revenues over 10 years. 
  • For all other taxpayers, the budget would extend the Bush tax cuts--including the 10, 15, 25, and 28 percent brackets, the child tax credit, and marriage penalty relief--at a cost of more than $2 trillion over 10 years (including debt service). The budget would also make permanent the stimulus bill's annual $800 per family tax cut at a cost of $504 billion over 10 years paid for by new "cap & trade" revenues.
  •  For the FY 2010 defense budget (excluding war costs), the budget proposes a 4% increase over FY 2009 levels.  The budget also proposes to increase Veterans Affairs funding by $25 billion over the next 5 years.
  • The Administration proposes selling carbon emission allowances through auction as part of a "cap-and-trade" system to cut greenhouse gases dramatically by 2050.  Sale of the emission allowances (estimated at $624 billion over 10 years) would be used to pay for $15 billion per year in renewable energy investments and offsetting the cost of making the stimulus bill's middle class tax cuts permanent
  • The Budget would make Pell grants (for college) an entitlement and would increase and expand maximum awards, spending $116 billion over 10 years. This would be partially offset by originating all new student loans in the Direct Loan program, thus eliminating bank subsidies.
  • The budget includes a $250 billion placeholder for further efforts to infuse capital into shaky banks, although Congress did not accommodate additional TARP funds in the FY 2010 Budget Resolution.
  • A key detail of this year's Congressional budget process is that Congress' FY 2010 Budget Resolution requires that the costs of health care reform be fully offset but will also permit this years health care reform legislation to be included in a Budget Reconciliation bill effectively requiring 51 votes to pass the Senate making the legislation filibuster proof.

FY 2010 Agency Budget Highlights:

Department of Health and Human Services

  • Food and Drug Administration- $2.4billion (+$295 million over FY 2009);
  • Health Resources and Services Administration- $7.1 billion (-$102 million from     FY 2009)
  • Indian Health Service- $4 billion (+$454 million over FY 2009)
  • Centers for Disease Control and Prevention- $6.4 billion (+$32 million from FY     2009)
  • National Institutes of Health- $31 billion (+$443 million over FY 2009)
  • Substance Abuse and Mental Health Services Administration- $3.4 billion (+$59   million over FY 2009)
  • Agency for Healthcare Research and Quality- $372 million (equal to FY 2009)

Department of Energy

  • Office of Science- $4.9 billion (+$200 million over FY 2009)
  • Advanced Research Projects Agency –Energy- $10 million

FY 2009 War Supplemental Spending Bill

On May 7th, the House Appropriations Committee approved a supplemental spending measure totaling $96.7 billion to fund the wars in Iraq and Afghanistan through the remainder of FY 2009.  Also included in the measure is $734.4 million to give a $500-per-month bonus to more than 170,000 military personnel who have been held in service beyond their enlistment.  The bill also includes $2 billion for pandemic flu preparedness.  It does not contain any funding for the closing of the Guantanamo detention facility.

The House bill was debated and passed on May 14th by a vote of 368-60.  Also on May 14th, the Senate Appropriations Committee marked up and reported out its version of the bill to the full Senate by a vote of 30-0.

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