Just prior to President Obama’s State of the Union speech –where he called for increased federal investment in areas of our economy, including transportation infrastructure – the House of Representatives passed a resolution to “transition” non-security spending for FY 2011 to FY 2008 levels. The good news is that they are no longer trying to reign in all spending immediately. The bad news is that this will put pressure on Congress to cut spending immediately, including infrastructure.
The House Republican plan at this point involves cutting the aggregate total spending down to FY 2008 levels, or about 5-15 percent below last year’s spending levels. There are no details yet on what or how much will actually be cut, and the full extent of those cuts on individual agencies and programs will not be known until the Appropriations Committee begins to divide up its FY 2011 spending allocation in the next few weeks.
Each year the federal government spends more than $100 billion on construction in about 75 programs. The first quarter of 2011 will offer a couple of opportunities for the cutting and spending factions to do battle, including when Congress votes to extend government spending for the second half of the fiscal year. Currently, the federal government is operating at FY 2010 levels under a continuing resolution that expires March 4. The extension of that spending bill to cover the entire fiscal year (ending September 30, 2011) will mark the first opportunity for Congress to actually cut federal spending. The next opportunity will be as Congress considers raising the debt ceiling. The Obama administration has said the U.S. could hit the $14.3 trillion debt level as soon as March 31, and they are pushing Congress to raise the limit soon. Republicans are pushing for spending cuts and spending caps to be added to any bill raising the federal debt limit; however the Obama administration has resisted making cuts on the debt limit bill.
The latest news to escalate the budget cut debate was the Congressional Budget Office’s (CBO) Economic and Budget Outlook over the next 10 years. The report predicts that the U.S. debt is much worse than originally thought. According to CBO, the 2011 deficit will be nearly $1.5 trillion up from the 2010 $1.3 trillion deficit. The report also projected the unemployment rate would not fall below 9.2 percent in 2011 (currently 9.4 percent). What all this adds up to is that Republicans will use the deficit number to push forward drastic cuts in spending while the Democrats will likely call for targeted cuts that don’t cut spending too quickly or deeply.
AGC is working to differentiate construction investment programs from other spending programs. We are urging Congress to maintain levels of capital investment necessary to support economic growth, job growth and improve international competitiveness.
For more information, contact Sean O’Neill at (202) 547-8892 or oneills@agc.org.
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