Why the near shutdown matters

Five days before the new fiscal year began, Congress and the White House fought the last exhausting battle of the 2011 budget.

That's right. The new Republican-led House fought the Democratic Senate and Obama White House until the 360th day of the 2011 fiscal year, which began Oct. 1 of 2010. Call it the 12 months' war -- a mere skirmish in advance of the battle sure to break out over proposals due in November from the bi-partisan select committee on deficit reduction.

In the end, the terrain was the same -- exactly the same -- as the three sides fought over in the Spring, when the nation inched within hours of a government shutdown. House Republicans won budget cuts in that conflict that they were adamant to protect now. In fact, the entire tussle over offsetting $1.5 billion out of $3.65 billion in proposed disaster assistance had nothing to do with any durable principle and everything to do with Republicans not adding a cent to the budget they'd negotiated in May. Those hard-won gains have gained an almost mythological importance to House Republicans and the tea party-inspired freshmen.

In the end, House Republicans won that part of the fight. Monday's deal adds no new spending to the 2011 budget. The stopgap spending bill funds all government operations until Nov. 18, pending its expected approval in the House. The deal also, as will be explained in greater detail, addresses disaster funding more directly. Even so, It sets up another clash later this year or early next when Congress and the White House must face the costs of an array of natural disasters the current deal on federal disaster funding will not cover.

And it is this future budgetary battle space Senate Democrats believe they have won an important tactical advantage.

To sort all of this out, it's important to look at the numbers for 2011 and 2012 as well as how the Monday deal temporarily, but only temporarily, solves the disaster assistance crisis.

The House Republicans wanted to protect the 2011 discretionary spending total of $1.050 trillion hammered out in the deal that averted a government shutdown in May. All allocations for disaster assistance in that budget year had to be offset. That's why House Republicans sought to cut up to $1.5 billion from federal grants supporting fuel efficient vehicle production and, in the final hours of the conflict, $100 million from renewable energy grants.

This strategy was designed to force the White House and Senate Democrats to cut programs they like in order to respect the budget cuts they negotiated in the Spring. Instead, the White House and Senate Democrats played a stalling game - one that increased the chances of a government shutdown and hallowed out the Federal Emergency Management Agency's ability to respond to the batch of late summer disasters that befell the nation.

In the end, that spared the administration from having to accept the GOP premise that budget cuts should finance at least some disaster aid. In an atmosphere of economic fragility and fears of a double-dip recession, the White House didn't want to give an inch in this direction. It also wanted to protect the loan programs for green technologies.

And it succeeded. The White House, according to Senate Democratic aides, found a way to keep FEMA's disaster relief efforts - meager though they are now due to lack of funds - afloat until Friday. Earlier FEMA estimates, deemed authoritative as late as Friday, projected FEMA would run out of money for its Disaster Relief Account by no later than Wednesday. The ability to last until Friday came in response to administration demands to make every dollar stretch until the end of the fiscal year on Friday.

In doing so, the White House and Senate Democrats averted the need for budget offsets. Why? Because House Republicans already agreed to abide by the spending totals in the 2012 budget year as part of the debt ceiling deal reached in August. That budget of $1.043 trillion was recognized in the House Republican stop-gap spending bill. No offsets for FEMA disaster assistance would be necessary starting Saturday. In essence, the deal is the House approach to 2012 disaster funding with no 2011 offsets.

And so it will be. In fact, it is now understood by all sides - the White House, Senate Democrats and House Republicans - that FEMA will get all of the 2012 allocation of $2.65 billion right away - via upfront funding through the Office of Management and Budget.

That will allow FEMA to meet immediate disaster needs and longer term reconstruction needs. With funds having run so short for weeks, FEMA has only been able to cope with immediate, emergency needs. Long-term reconstruction projects have stalled but will soon restart.

But it is widely understood by all sides that FEMA will need more than $2.65 billion to address all the disaster requests associated with Hurricane Irene, the Texas wildfires, the Virginia-based earthquake, and Tropical storm Lee. When those funds are sought, Congress will have to decide how to find the funds.

By agreeing in advance that 2012 FEMA funds do not have to be offset, Republicans will be hard-pressed to demand offsets for additional disaster aid. The debt ceiling deal created an extra $11 billion in disaster reserve funds to be called upon as required.

In fact, the $2.65 billion in FEMA funding for 2012 incorporates $800 million from the disaster reserve fund. The rest, $1.8 billion, is the allocation under the $1.043 discretionary funding total for all government operations as negotiated in debt-ceiling-inspired Budget Control Act.

When more funds are needed for FEMA later this year or early next year, Democrats believe they have won both tactical arguments to add that spending to the deficit - Republicans didn't object to no offsets of the $1.8 billion or the $800 million from the disaster reserve fund.

As the dust settles, it's clear Republicans were fighting to protect the spending cuts they won in the 2011 budget and Democrats and the White House were protecting spending to come in 2012.

Maybe it was a two years war.

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