Between the ‘Line’s: Limits, Meetings, Triggers, and Cloture
Bumping Up on the Debt Ceiling – On Monday, Treasury Secretary Tim Geithner sent a letter to congressional leaders saying that his department this week would begin the “extraordinary measures” necessary to stave off a U.S. default absent an increase in the statutory debt limit, which will be breached around May 16. On Friday, Treasury will suspend the issuance of State and Local Government Series (SLGS) Treasury securities. In the letter Secretary Geithner cautioned that the action “is not without costs; it will deprive state and local governments of an important tool to manage their outstanding debt expenses.” While the letter also said that better-than-expected tax receipts mean that default can be delayed until around August 2, Geithner warned that delay could hamper market confidence in the U.S. and impact the economy. August should not be seen as the deadline for increasing the statutory debt ceiling; an agreement should be reached in a timely manner that increases the limit and includes concrete steps to improve the nation’s fiscal outlook. CRFB co-chairs Bill Frenzel and Charlie Stenholm offered ideas in The Hill for a deal. While a comprehensive, multiyear fiscal plan along the lines of that being negotiated by the Senate Gang of Six would be ideal, there may not be time to enact it, making a “Plan B” consisting of statutory debt and savings targets enforced by triggers as proposed by the Peterson-Pew Commission on Budget Reform the best alternative. See CRFB’s paper on responsible approaches to increasing the debt limit.
Biden Meeting Sets Stage for Debt Limit Negotiations – A Thursday meeting led by Vice President Biden will effectively commence talks over increasing the debt limit. Biden will meet with a bipartisan, bicameral group of lawmakers hand-picked by congressional leaders. Democrats and Republicans agree that budget enforcement mechanisms like budget caps and debt targets will be key to an agreement. Republicans have also dropped demands on overhauling Medicare in order to focus on areas that can achieve bipartisan agreement, like cutting farm subsidies. While these signs are positive, getting to an agreement will still be difficult. The Washington Post’s Steven Pearlstein suggests sending in the Navy SEALs, but there may be a more subtle approach. Perhaps if the VP serves margaritas in observance of Cinco de Mayo, agreement can be reached quickly.
Triggers? Figures – With the increasing focus on budget process as a part of a debt limit compromise, budget enforcement mechanisms like debt triggers are receiving increased scrutiny. A Senate Finance Committee hearing on Wednesday addressed the subject where witnesses generally agreed that mechanisms like triggers can be part of the solution, but that they are no substitute for making the tough policy decisions required to get our fiscal house in order. See the Peterson-Pew Commission recommendations for making triggers work.
No Sense of Cloture – On Wednesday the Senate failed to invoke cloture on small business legislation (S. 493) that has become the vehicle for several fiscal measures, including amendments from Sen. Tom Coburn (R-OK) that would reduce duplication in government and cut other spending. The fate of the legislation is unknown.
Senate Budget to Proceed – Senate Budget Committee Chair Kent Conrad (D-ND) says that he will mark-up a FY 2012 budget resolution next week, perhaps as early as Monday, in his committee. The proposal reportedly will reduce the deficit by some $4 trillion over ten years.
White House Wants to Sell Excess Federal Property Brick-by-BRAC – The Obama Administration on Wednesday proposed that Congress form a BRAC-like commission to oversee the sale of over 12,000 federal properties it has identified as excess, which it estimates could bring in some $15 billion over three years.
Corporate Tax Reform Awaits – The White House is gearing up to promote corporate tax reform, proposing to reduce the top rate to under 30 percent. The plan could be considered alone or be added to the 2012 budget or a long-term debt reduction deal.