The Budget for Fiscal Year 2007

Publication Date: January 2007

Publisher: Library of Congress. Congressional Research Service

Author(s):

Research Area: Banking and finance

Type:

Abstract:

Congress used three continuing resolutions on appropriations (CRs) to fund all but two appropriation acts in the first half of fiscal year (FY) 2007. The third one (P.L.109-383; December 9, 2006), runs through February 15, 2007. The new chairmen of the House and Senate Appropriations Committees indicated that they will present a full-year, modified resolution to Congress funding the remaining appropriations before the third CR expires.

New estimates for FY2007 will become available soon, from both CBO (late January 2007) and the Administration (early February). The previous FY2007 estimates (summer 2006) from the Administration and CBO showed receipts near $2.5 trillion, outlays near $2.8 trillion, and the deficit between $290 billion and $340 billion.

The President's FY2007 budget, released in early February 2006, included proposals to make the 2001 and 2003 tax cuts permanent; slow the growth of Medicare spending; hold non-defense, non-homeland security funding to little if any increase; and introduce, in FY2010, private accounts for Social Security. The budget did not extend relief from the expanding coverage of the alternative minimum tax (AMT) or fund current military actions overseas after FY2007.

The CBO's January 2006 budget report provided baseline estimates and projections through FY2016. The baseline, following required guidelines, assumed that most current policies remain unchanged. The current law expiration of tax cuts in 2010 led to small projected surpluses beginning in FY2012. The report's policy alternatives (to those in the baseline) were used to illustrate how different policy assumptions alter the baseline results . One alternative, extending the tax cuts and maintaining AMT relief, would keep the budget in deficit.

The Senate passed its version of the FY2007 budget resolution (S.Con.Res. 83) on March 16, 2006. After extended delays, the House passed its resolution (H.Con.Res. 376) on May 18. The extensive differences between the two versions resulted in no House-Senate agreement (so far) on the FY2007 budget resolution. The absence of an agreement prompted both the House and Senate to adopt (separately) deeming resolutions, essentially establishing an overall dollar amount available for appropriations, for budget enforcement purposes.

Over the longer term, the retirement of the baby boom generation will put enormous pressure on the federal budget and the economy. Both the Administration and CBO budget reports recognize this, indicating that current federal programs for the elderly are unsustainable. Without substantial changes to these programs and policies, their relentless growth in the future will disrupt the government's ability to maintain other programs, require large tax increases or large borrowing to fund the government, likely interfere with the government's ability to finance its obligations, and possibly lead to adverse, and severe, economic consequences.

This report will be updated as events warrant.