‘Line’ Items: Blossoms Edition
In Bloom – Spring is officially here, though the weather would have one think otherwise. Frigid temperatures and even a little snow in the Washington, DC area early Sunday are indicative of how Washington often seems to resist the trends. Yet the inexorable change of seasons is upon us. The snow is already gone and the Cherry Blossoms are blooming. The Cherry Blossoms are a uniquely Washington tradition, drawing tourists by the thousands to experience their beauty and the promise of renewal that they represent. Unfortunately another spring tradition in DC is already in full blossom--posturing and inaction on the federal budget--and this bloom of gloom is plentiful this year. Friday, which fittingly is April Fools Day, will mark the halfway point of the fiscal year without a spending plan and it is unclear if one will be reached soon.
A Budding Compromise? – The Wall Street Journal reports that Democrats are preparing a proposal to fund the government for the rest of FY 2011 that would result in total cuts of about $30 billion from current levels. It is not lost on progressives that this is roughly the level of cuts proposed by House Budget Committee Chair Paul Ryan (R-WI) back in early February, but their adversaries would not consider this a victory either. Conservatives are insistent on double the cuts and are not interested in compromise. The Tea Party will rally in Washington this week to keep the pressure on to hold the line. Any spending compromise will require lawmakers from both parties to buck their respective bases to approve it. Will this process show that there is a constituency for fiscal collaboration? Or will compromise be nipped in the bud? According to a recent Pew Research poll, the public thinks the deficit debate so far has been “generally rude and disrespectful” and that neither side has very good ideas for addressing our fiscal problems. Sounds like voters are ready for a new approach. It may seem like cooperation is impossible in this environment, but stranger things have happened (e.g. VCU in the Final Four).
Sowing the Seeds for Next Year – The 2012 budget debate will blossom soon; Rep. Ryan is expected to unveil his budget blueprint by early next month. His counterpart on the other side of the Capitol, Senate Budget Committee Chair Kent Conrad (D-ND), is holding off on his proposal to see if the so-called “Gang of Six” that he is a part of can agree on a comprehensive plan that he could incorporate. Entitlements, which have been absent from the 2011 spending discussion, will definitely be in the 2012 mix. House Republican leaders have promised that their budget plan will include entitlement reform and the recommendations from the Fiscal Commission, which the Senate group is using as the basis for its negotiations, also included entitlements. Meanwhile, a moderate group, Third Way, argues that Democrats should embrace entitlement reform, instead of fighting it.
Will Social Security Reform Flower? – Democrats are split over how to deal with Social Security, though Senate Majority Leader Harry Reid (D-NV) has been quite adamant that it should be left alone and the Democratic Congressional Campaign Committee is ramping up efforts targeting GOP lawmakers on the issue. But the fact hat one aspect of the vital program, the Social Security Disability Insurance program, is on a course to become insolvent within a few years may spur action. In a paper last week, CRFB argued that whether you view Social Security as part of the federal budget or a stand-alone program, the prescription for fixing it is the same and the time is now to do so. See some ideas for Social Security reform here.
Putting Taxes in the Mix – Rep. Chaka Fattah (D-PA) proposes a one percent tax on financial transactions, arguing that it could eliminate the debt in ten years. Meanwhile, interest groups on the right are fighting any form of revenue increase. However, a recent Washington Post/ABC News poll finds that a majority of respondents say that the best way to reduce the deficit is with a combination of spending cuts and tax increases. CRFB has long said that everything, including revenues, will have to be on the table in reducing the debt, and that tax reform can help put the country on a sustainable fiscal course. A paper from the Pew Fiscal Analysis Initiative illustrates that relying on just spending cuts, or just tax increases for that matter, is unrealistic and how a comprehensive approach is more sensible. The Center on Budget and Policy Priorities also suggests a balanced plan in a new paper, specifically targeting tax expenditures. See an explanation of these tax breaks and some ideas for reforming them here.
Budget Process Reform Ideas Sprout – Republican leaders in the Senate are pushing for a vote on a balanced budget amendment as a prerequisite for voting to increase the debt limit, and the caucus is reportedly unifying behind a proposal that would require the president to submit a balanced budget each year, would require a 2/3 vote of Congress to run a deficit in a given year and limit expenditures to 18 percent of GDP. The statutory debt limit may be reached as early as next month. Also, in today’s Politico, former Senator Pete Domenici and former CBO and OMB director Alice Rivlin call for new, enforceable budget rules to rein in debt. The Peterson-Pew Commission on Budget Reform offered ideas for major budget process reform in the report, Getting Back in the Black.
Key Upcoming Dates
• House Budget Committee hears "Member's Day" testimony from Members of Congress at 10 am.
• House Ways and Means Committee hearing on impediments to job creation, including deficits and debt, at 10 am.
• Weekly unemployment claims data released by the Department of Labor BLS.
• Department of Labor releases March employment figures.
• The current continuing resolution (CR) funding government operations expires. Congress must adopt spending bills funding the federal government for the rest of FY 2011 by then or pass another stopgap measure.
• Statutory deadline for Congress to enact a Fiscal Year 2012 Budget Resolution.
April 15 - May 31
• Period in which Treasury Secretary Geithner says the U.S. will likely reach the debt ceiling.