Line Items: Cicada Edition
Lots of Buzz – The Cicadas are coming back. After maturing underground for 17 years, billions of the insects from the Brood II cohort are beginning to emerge throughout the East Coast. Some compare them to the biblical locust swarms. Whether or not they are a portent of doom, their distinctive mating call is definitely attention-grabbing. Loud, relentless calls seem to be the only way to get attention in Washington. With the budget process stalled, lawmakers seem to need constant pestering to get back on track. Meanwhile, buzz is building for tax reform in Washington and against sequestration outside of DC. All this could help bring about a much-needed deal addressing the national debt. When this brood of cicadas last popped up in 1996, the federal budget deficit was $107 billion and declining. Let’s see what this batch of bugs will bring.
Winging It on Sequestration – Congress returns this week from another recess. Just before leaving town, lawmakers hurriedly approved legislation to give the Federal Aviation Administration (FAA) more flexibility in implementing the automatic spending cuts of the sequester in order to prevent furloughs of air traffic controllers. The flight delays caused by the furloughs prompted a backlash among travelers. But incremental fixes won’t solve the problems caused by the abrupt and arbitrary cuts. Even though the size of sequestration has been reduced to $80 billion from $85 billion for this year due to some technical adjustments, cuts to Head Start, national parks and other areas will be felt because policymakers have been unable to work together to come up with a smart approach to the debt. Sequestration should be replaced by a comprehensive, long-term package.
Calls for a Debt Deal Continue – The call of the Cicada can’t be ignored. It is the same for some policymakers when it comes to addressing the national debt. The White House continues to reach out to members of Congress, including a select group of Republican senators through meetings with senior staff and a golf outing with the President. Sen. Bob Corker (R-TN) sees “a lot of activity” towards a deal this summer. CRFB’s Maya MacGuineas says President Obama made some progress in the first 100 days of his second term, but more needs to be done, like reaching out to the public, not just lawmakers. Just like the Cicadas, the louder the calls for a debt deal, the more likely they will be heard. Join the movement by signing the Citizen’s Petition to Fix the Debt.
Swarming on Tax Reform – If you think 17 years is a long time between events, the last major reform of the tax code occurred 27 years ago in 1986. But there has been significant movement as of late. House Republicans are intent on moving tax reform this year and are floating tying it to an increase in the debt limit. However, Democrats want a clean debt ceiling increase. Meanwhile, the congressional Joint Committee on Taxation (JCT) released a report of more than 550 pages explaining current tax law along with tax reform proposals from various organizations and ideas presented by 11 congressional working groups. Comments from special interest groups interested in protecting the tax breaks that benefit them show that reform won’t be easy, but it is critical to getting our fiscal house in order. The chairs of the two congressional tax-writing committees, Rep. Dave Camp (R-MI) and Sen. Max Baucus (D-MT) continue their coordinated effort to get a reform package through this year.
Budget Conference Can’t Get Off the Ground – Although both the House and Senate passed budget resolutions for fiscal year 2014, the process of reconciling the two budgets as not yet formally begun. While the chairs of the two budget committees, Sen. Patty Murray (D-WA) and Paul Ryan (R-WI), have had some conversations, a conference committee to negotiate has not been formed. Senate Democrats tried to force the matter this week, but were blocked. Republicans want to set some ground rules before entering the formal negotiations because they argue an open-ended process would lead to certain failure. A functioning budget process is vital to effective governance and the process could help pave the way to a debt deal.
Americans Bugged By Debt – The latest Fiscal Confidence Index from the Peter G. Peterson Foundation indicates that Americans are very concerned about the fiscal condition of the country. Respondents also expressed concern for the financial well-being of Social Security and Medicare and worried that without changes they could place a financial burden on future generations. These concerns and many others were addressed at the 2013 Fiscal Summit in Washington, DC on Tuesday, which featured heavy hitters such as former President Bill Clinton and Microsoft’s Bill Gates discussing the economy, the future and the need to address the long-term fiscal outlook. Read a recap of the conference here. As we point out, deficit reduction doesn’t have to be front-loaded. It can be done in a smart way that protects the recovery in the short term and promotes growth in the long term. The recent Simpson-Bowles plan provides an example of such an approach.
Debt Limit Pops Up Again – A more frequent pest than the Cicadas is the statutory debt ceiling. The debt limit fight two years ago wreaked havoc in Washington and nearly led to a national default. Lawmakers are already girding for the next fight later this year. The House this week will consider legislation that will prioritize payments on the national debt and for Social Security in case the debt limit is reached. House Republicans will meet to discuss debt limit strategy on May 15. Republicans appear intent to push for concessions such as spending cuts and/or tax reform in exchange for a debt ceiling increase and are looking to inoculate themselves from criticism that they are risking default. The White House has already signaled it will veto the prioritization bill and wants a clean increase. The suspension of the debt limit will end on May 18, at which time the Treasury Department can use “extraordinary measures” to avoid a default until as late as October by one estimate. A comprehensive fiscal plan is the only thing that will put an end to the incessant brinkmanship and posturing. Track debt limit developments here.
Key Upcoming Dates (all times are ET)
- The CBO releases its updated budget baseline, showing new projections for the next ten years.
- Senate Finance Committee hearing on Medicare physician payemnts at 10 am.
- Senate Agriculture, Nutrition & Forestry Committee mark-up of the farm bill at 10 am.
- Dept. of Labor's Bureau of Labor Statistics releases April 2013 Consumer Price Index data.
- The CBO releases its analysis of the President's FY 2014 budget.
- The debt limit is re-instated at an increased amount to account for debt issued between the signing of the suspension bill and this date. After re-instatement, the Treasury Department will be able to use "extraordinary measures" to put off the date the government hits the debt limit potentially for a few months.
- Joint Economic Committee hearing on "The Economic Outlook" with Federal Reserve Chair Ben Bernanke at 10 am.
- Bureau of Economic Analysis releases second estimate of 2013 1st quarter GDP.
- Deadline for estimated quarterly individual and corporate tax payments.