Policy Update: March 22, 2012

This has been a busy week in Washington, DC - while the House was focused on the FY 13 budget (below is a summary), Northeastern was also focused on issues of Homeland Security. President Aoun attended the Homeland Security Academic Advisory Council (HSAAC) meeting, of which he is a member, and we held our first congressional briefing on Cyber Security


On Tuesday, House Budget Committee Chairman Paul Ryan (R-WI) introduced a proposed FY 13 Budget that would cut spending significantly on a wide variety of domestic discretionary and entitlement programs, while protecting defense spending.  The measure, which is moving through the House Budget Committee, also calls for revamping Medicare and Medicaid, repealing health care reform, and overhauling the tax code.

The budget resolution would set FY13 discretionary spending about $19 billion below the $1.047 trillion level approved with bipartisan support in last year’s Budget Control Act (BCA), with added funding for defense and cuts in domestic spending.  The budget plan would set defense discretionary spending at $554 billion, or about $8 billion above the BCA level.  Domestic discretionary spending would be set at $474 billion, or about $27 billion below the BCA level, says the publication.  

If this budget passes it will set lower caps on the Appropriations committee, which will actually determine agency FY 13 budgets that Northeastern depends on such as the Department of Education, NIH, NSF, DOE, DoD, and DHS research, NIST and the like. Interestingly, the energy section of the budget summary says: 

“This budget would continue funding essential government missions, including energy security and basic research and development, while paring back duplicative spending and non-core functions, such as applied and commercial research or development projects best left to the private sector.”

With respect to tax reform, the budget proposes to broaden the tax base by lowering rates.  While some special tax credits and deductions would be eliminated and loopholes closed, current marginal rates for individuals would be lowered to just two brackets, a 25% and a 10% rate, and the corporate tax rate reduced to 25%.  However, the proposal is silent about whether changes should be made to the charitable deduction, American Opportunity tax credit, or tuition and fees deduction, among others of interest to universities.

Meanwhile, Senate Democratic leaders say they will stick with the agreed to discretionary spending level of $1.047 trillion.  They expect to move a budget resolution soon that would enable Senate appropriators to begin moving their FY13 bills.  

Regarding Pell Grants, language in a summary of the House budget is unclear.  The document says that the budget would place Pell on a sustainable path by limiting growth of financial aid and focusing it on low-income students who need it most.  

Finally, unless Congress takes action to repeal the spending “sequester,” an additional $109 billion in automatic cuts will take effect in January, pruning about $55 billion out of defense, about $43 billion out of domestic discretionary programs and the balance out of mandatory programs.