Republicans appear to be succeeding at starving the beast after all, or at least some of the beast's spawn. By refusing to allow the omnibus spending bill to provide the government a new budget for next year, spending will instead mirror that of 2010. Of course, this year's budget didn't reflect all of the aggressive legislation passed by Democrats, including health care reform and the giant financial regulation package. Although more media focus has been on what this means for health care bill, the potential consequences to new financial regulation efforts are just as dire.
Pat Garofalo at ThinkProgress reports:
Under the omnibus, the Securities and Exchange Commission would have seen its budget increase to $1.3 billion from $1.1 billion, and the CFTC would have gone from $169 million to $286 million.
Already, the SEC has halted implementation of a variety of measures under the law as it waits for funding. Included in this halt are new regulations for credit rating agencies and an office for financial markets whistleblowers. The Commodity Futures and Trading Commission (which is charged with implementing the derivatives title of the bill) has said that its current funding level "is far less than what is required to properly fulfill our significantly expanded role." "The implementation of that good and historic law is in jeopardy if the CFTC doesn't have increased resources," Bart Chilton, a CFTC commissioner, has said.
And other new agencies, regulator divisions, or rules requiring appropriations funding
, like the Consumer Financial Protection Bureau* could also be in trouble.
This will likely make financial reform proponents angry, but it might also leave them scratching their heads. If Democrats were so eager to impose this broad new regulation, why wouldn't they have set aside the money to do so in the bill itself -- rather than leave it up to next year's budget?
The answer is two-fold. The Dodd-Frank bill directed an enormous portion of the new rules to be written by regulators. Some of it would depend on studies or regulator discretion. You can't fund something if you don't know what it will look like, so these parts of the new regulation couldn't have been anticipated well enough to know what its funding should look like.
But the broader problem is one of politics. Even if Democrats knew how much funding each new effort would need, they still wouldn't have included it in the bill. This wasn't an oversight; this is just how Congress works.
When new discretionary spending is set to occur due to legislative changes, Congress relies on its appropriations committees to draft the legislation for the associated spending. While Democrats technically could have simply allocated this funding within Dodd-Frank, such a move is generally frowned upon. That's supposed to happen on an appropriations committee's turf.
In theory, Republicans could refuse to allow this spending to occur for years, but these things usually have a way of getting resolved. They'll probably seek a compromise, and Democrats will ultimately have to play ball if they want their new legislation carried out. After all, without funding, it would be as though some of these new regulatory efforts never succeeded to begin with.
If Republicans really do carry out the threat of never allowing such funding, it would be interesting to see if this reshapes how Congress works. Even tradition might not be enough to ensure that discretionary spending needs are left to appropriations. After all, if Democrats had bucked the usual procedure and included funding within the bills in question, then Republicans would not have been able to prevent their implementation after they passed.
*Correction/Update: The Bureau is actually a part of the Federal Reserve, so is not subject to appropriations funding. As a result, it escapes the problem faced by other aspects of Dodd-Frank. Interestingly, Republicans that fought to stick it in the Fed might have accidentally ensured its survival.
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