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Congress surges forward on president's economic package.

As elected leaders from cities and towns stormed Capitol Hill last week in support of the President's economic recovery plan, Congress began to respond on a number of fronts.

House Appropriations Committee Chairman William Natcher (D-Ky.) took the lead to revive the nation's cities' and towns' economies as Congress sought to complete action on the first two of three critical steps: adopting a budget resolution and sending a stimulus package to the White House before the April 2 Easter recess.

Natcher's House Appropriations Committee passed and sent to the full House for action this week the funding part of the President's $16.3 billion economic stimulus package, including one-time funding of:

* $2.5 billion for the Community Development Block Grant (CDBG) program,

* nearly $4 billion for the ISTEA surface transportation programs,

* nearly $1 billion for the municipal wastewater state revolving loan fund program,

* 500 million for Head Start,

* $250 million in rural water, sewer, and waste disposal assistance, and

* $1 billion for the summer jobs programs.

The stimulus package faces efforts to delay or defeat it in both the House and Senate. The President and Congressional leadership have agreed to hold the stimulus funds hostage until Congress completes action on the budget resolution, so that spending and deficit cuts can be locked in before Congress votes on the short term spending increases.

But some members have raised questions about the need for a stimulus or about the ability of city officials to use the funds effectively.

Congress will take up the other part of the President's stimulus plan, tax incentives, including permanent extensions of priority municipal programs, in later reconciliation legislation providing for long-term investment and deficit reduction.

In addition to the supplemental funding, the committee voted to provide more than $3.3 billion in credit, largely for small business.

As reported, the bill would impose strict "use it or lose it" rules on the transportation funds, taking whatever funds are not obligated and for which bids have not been received from cities or states and redistributing them to other states.

The bill would provide a longer period for the use of CDBG funds, but then deobligate funds which were not drawn down by a city or town.

House, Senate Budget Units

Finish President's Budget

Both the House and Senate Budget Committees completed action last week on the President's Fiscal year 1994 budget, setting the blueprint for the nation's spending priorities. The House is set to take up its version this week, clearing the way for action on the stimulus package.

The House panel, chaired by Rep. Martin Sabo (D-Minn.) adopted the President's investment package, but added $62 billion in additional spending cuts over the next five years.

The Senate Budget Committee, chaired by Sen. Jim Sasser (D-Tenn.) endorsed the President's stimulus and long-term investment plans, but proposed $96 billion in deficit reductions, including more tax increases, more spending cuts, and delays and reduction in some of the President's investment package affecting the nation's cities and towns.

Sabo called the House resolution "a package that cuts spending, shifts priorities, and lays the foundations for long-term economic growth."

Sasser emphasized his special concern that Congress act swiftly to pass the stimulus package in order to help cities and towns provide jobs right away (See Chart):

"The most troubling aspect of this very troubling recession has been the paucity and uncertainty of job creation ... In a normal recovery, over 4 million jobs would have been created. But less than a million jobs have been, and the American Management Association reports that one-in-four large American companies are planning layoffs."

House Action

The House budget resolution proposes to make $3.7 billion more in discretionary spending cuts next year than President Clinton, with many of the cuts coming from transportation and community development programs; however, the committee rejected 30 amendments which would have made far deeper cuts in domestic programs and eliminated the long-term investment program entirely.

While the budget resolution itself is not binding, it sets in process a mandatory process called reconciliation in which each of the committees in Congress is instructed to make cuts or tax increases to achieve the level of deficit reduction set in the Budget Committee's instructions.

This means that the committees can ignore specific suggestions, but must meet the bottom line. For cities and towns, this will create some especially difficult struggles in the appropriations or spending committees, where the committees will find the President's long-term initiatives pitted against proposed cuts in existing programs. Because the House budget resolution would impose a real freeze on domestic spending over the next five years, it will force difficult tradeoffs if the President's plans are to succeed.

Senate Action

The Senate rejected nearly as many amendments in adopting a $502 billion deficit reduction plan. The committee agreed to increase deficit reduction from the Clinton plan by $92 billion over five years by cutting back on some of the President's tax incentives - including all of the municipal priorities, by deferring and stretching out many of the President's long-term investments, and by proposing management and administrative savings.

Sasser proposed to cut the President's Proposed reauthorization and permanent extension of municipal authority to issue mortgage revenue and small issue industrial development bonds to two years, to cut the extensions of the Low Income Housing and Targeted Jobs Tax Credit extensions down to two years, and to. cut the President's enterprise zone initiative by 60 percent.

Although these recommendations are not binding, they are used to show the Senate Finance Committee the assumptions the Senate Budget Committee used in coming up with the bottom line the Finance Committee will be mandated to achieve for both revenue increases and spending cuts. They marked the first setback for cities and towns as Congress began consideration of the President's economic package.

Like the House action, the Senate action clears the way for the Senate to begin work on the budget as early as this week, with a goal of working out differences between the House and Senate before the end of the month. That would clear the path for action on the stimulus package for cities and set in motion the next step, reconciliation, where the budget blueprint will actually become the law.
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Author:Shafroth, Frank
Publication:Nation's Cities Weekly
Date:Mar 15, 1993
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