The Fiscal Fiasco of 2011: A Downgrade, a Shutdown and 8 Stop-Gap Funding Bills

J. Scott Applewhite/AP Photo

Whether it was family planning programs, disaster relief or the debt ceiling, the funding battles that plagued fiscal year 2011 were some of the most contentious in recent memory.

Seven times during the past 12 months the federal government came within 72 hours of shutting down and once there was a 40 minute lapse in federal funding as legislators scrambled to strike last-minute bargains on short-term appropriations bills. Although fiscal year 2012 began just four days ago, Congress is already set to vote on its second continuing resolution of the year today.

“I have never seen it look quite so bad,” said Thomas Mann, a senior fellow at the non-partisan Brookings Institute. “It’s a permanent war [between] very different parties, highly polarized parties.”

The eight short-term funding bills passed in 2011 culminated in $78.5 billion less spending than President Obama requested in his 2011 budget, a bill that was never voted on in either chamber. And while Congress reduced the 10-year deficit by $315 billion, it also decimated its already-low job approval ratings and presided over the first credit downgrade in U.S. history.

“We are in the midst of the logical and ultimate extension of the permanent campaign where the take-no-prisoners-but-take-hostages mentality has taken over,” said Norman Ornstein, a resident scholar at the American Enterprise Institute. “It’s blowing up government as we know it.”

But Michael Needham, the CEO of the conservative Heritage Action for America, rebutted the “hostage-taking” metaphor that many Democrats have used to describe the Republicans’ hard line on cutting spending without raising taxes.

“The House presented a vision of fiscal sanity and the Senate said that it was ‘mean spirited’ and ‘draconian,’” Needham said. “You have one party is trying to responsibly deal with the challenges our country has and another that has stuck its head in the sand.”

The most visceral fight took place in August over increasing the $14.3 trillion federal borrowing limit. After months of stalled negotiations between the White House and House Republicans, in August the S&P credit ratings agency downgraded America’s credit rating from the AAA to AA+ for the first time in history.

“It was a disaster,” Mann said. “The downgrading of our treasuries by S&P was a real embarrassment.”

Mann said the credit downgrade was a “commentary not on our deficit and debt problems but on our political system.”

“When the greatest economic and security power in the world acts in this fashion,” Mann said, “it was breathtaking.”

The funding fiasco began Sept. 29, 2010, while Democrats controlled both the House and the Senate. With the midterm elections looming just over a month away, Congress approved a funding measure that extended spending at 2010 levels until after the elections.

It passed with just under 24 hours to spare before funding was set to expire, narrowly avoiding a government shutdown. Congress left town soon afterwards to hit the campaign trail. Six Senate Democrats and 63 House Democrats would lose their re-election bids as Republicans gained control of the House in the biggest party swap since World War II.

Empowered by the Republican victory, the GOP blocked Democrat attempts to pass a $1.1 trillion omnibus bill that would have funded the government through the end of the fiscal year. Instead Congress passed three continuing resolutions during the final month of Democratic control in the House, all of which maintained 2010 funding levels.

After Republicans took control of the House in January the true “war,” as Mann calls it, began. The GOP sweep was due, in large part, to the success of Tea Party candidates, 41 of which won seats in the House. On Capitol Hill, this new ultra-fiscally conservative freshman class began demanding  the deep spending cuts they had promised throughout their campaigns.

Facing a projected $1.6 trillion budget deficit, the now Republican-controlled House passed a budget in February that would have slashed $61 billion in spending compared to the president’s budget request.  The Democrat-controlled Senate refused to take up the measure because Democrats claimed it would have eliminated 700,000 jobs.

Mann said the stalemate over a long-term budget stemmed from Republicans’ “willingness to take every hostage they can,” refusal to negotiate and determination to make drastic spending cuts without raising taxes.

“The parties are not equally to blame,” he said. “Republicans decided to make war with Obama and the Democrats in part because of promises to the Tea Party during the campaign and their embrace of them to pursue spending cuts.”

But Needham pointed out that Senate Democrats never even proposed a budget while  House Republicans have proposed and passed two separate budget bills.

“Our country clearly faces challenges and I think the House of Representatives has been the only branch that has actually passed legislation that meets the challenges,” Needham said.

With talks of a long-term funding bill stalled, the polarized parties reached a deal with just two days to spare before the Democrats’ fourth continuing resolution expired March 4. The two-week resolution cut spending by $4 billion and was intended to buy more time for House Republicans and the White House to reach a long-term funding deal under talks led by Vice President Joe Biden.

“We cannot keep doing business this way,” Obama said after the Senate passed the two-week resolution. “Living with the threat of a shutdown every few weeks is not responsible, and it puts our economic progress in jeopardy.”

Despite the president’s strong words, this first battle of the divided Congress was akin to a walk in the park compared to the deficit showdown and debt ceiling debacle to come.

The month of March was funded by three separate bills, each of which cut spending at the rate of $2 billion per week. House Speaker John Boehner, R-Ohio, said the $10 billion slashed from the 2010 spending levels in the March 2 and March 15 continuing resolutions was “a small down payment on our commitment to the American people that we have real fiscal responsibility.”

The shutdown showdown dominated the Congress, the White House and the country throughout April 2011 as hundreds of thousands of government jobs and billions of dollars in appropriations hung in the balance between Republican calls for spending cuts and Democratic insistence on maintaining federal programs.

With a “vast gulf” persisting ideologically between House Republicans and Senate Democrats, multiple rounds of budget talks broke down until an 11th-hour deal was struck between Obama, Boehner and Senate Majority Leader Reid. The fragile compromise was almost derailed over funding for family planning services such as Planned Parenthood.

Republicans wanted to eliminate the $363 million Title X funding as a cost-saving measure, a policy rider Senate Democrats promised to filibuster. The final compromise did not cut family planning funds, but mandated that the Senate hold a separate vote on defunding them.

The final votes on a week-long “bridge” continuing resolution came in 40 minutes after midnight, meaning there was technically a lapse in funding as Saturday, April 9 turned to Sunday, April 10. The Congressional Budget Office said no government agencies were shut down because a deal had been announced and the bill retroactively funded the 40-minute lapse.  The 7-day deal gave legislators time to finalize the details of the 5-month spending resolution.

“It’s been a grueling process,” Reid, D-Nev., said shortly after the vote. “We didn’t do it at this late hour for drama. We did it because it’s been very hard to arrive at this point.”

A week later Congress approved the eighth and final continuing resolution that would fund the government from April until September and reduced spending $78.5 billion below the president’s proposed budget.

“We hear a lot of talk about the uncertainly and the environment making it difficult for job creators to create jobs,” Mann said. “The greatest uncertainty is in the federal government occasioned by the partisan battles that have been so much in evidence this past year.”

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