Line Items: Grilling Edition
Grilling Time – It’s that time of year when the grills get fired up. There’s been grilling on Capitol Hill as well, with government officials being roasted by lawmakers over the IRS scandal. Congress is home again this week, where legislators can be grilled by constituents on what they are doing about the economy and the budget. Will the recent scandals distract from efforts to agree on a budget and a larger deficit reduction package or will policymakers seek bipartisan deals in order to put the scandals behind them? It will take some time for the smoke to clear.
Adding Lighter Fluid to Tax Reform – As the fallout of the scandal involving targeting of nonprofit groups by the Internal Revenue Service (IRS) continues, some lawmakers are making the case that the scandal demonstrates the need for tax reform. The argument is that reducing the complexity of the tax code could prevent such a situation. Meanwhile, the Congressional Budget Office (CBO) added fuel to the fire on Wednesday with a new report examining the costs of the major tax expenditures and who benefits the most from them. The report finds that the top ten tax breaks cost about $900 billion in lost revenue this year and will cost $12 trillion over the next decade. It also found that the top income earners benefited the most from the tax expenditures, although when measured as a share of after-tax income low-income taxpayers benefit the most. As we point out, the findings show the need for tax reform that simplifies the tax code and reduces the deficit.
Smoke Signals on Entitlements – On Friday the trustees overseeing Social Security and Medicare issued their annual reports on the state of the finances of the two vital programs. The numbers show that the programs face shortfalls down the road if action is not taken to strengthen their finances. The Social Security Trust Fund is projected to be exhausted in 2033, which will result in a reduction of benefits of 23 percent for all recipients. Social Security's Disability Insurance program faces a more immediate challenge as it is forecast to be depleted in 2016. Medicare's Hospital Insurance Trust Fund will become insolvent in 2026. The Economist recently featured an informative discussion on entitlement reform. In recent weeks the House Ways and Means Committee Health Subcommittee held a hearing on Medicare reform proposals and the Social Security Subcommittee held its own hearing on Social Security reform proposals where there was general agreement among the witnesses that Social Security reform should happen now so that the changes can be phased in over time, which will eliminate the need for abrupt changes to beneficiaries and give them more time to prepare. CRFB’s Ed Lorenzen testified how the Simpson-Bowles plan would strengthen Social Security while protecting the most vulnerable beneficiaries. CRFB is co-hosting a forum on Tuesday, June 4 in Washington, DC to discuss the challenges facing Social security. The event will feature a discussion of the new trustees report and an advance look at our new, interactive Social Security reform tool that will allow users to choose how they will improve Social Security’s finances.
Still Not Trimming the Fat – Policymakers have had a mean recipe for eliminating duplicative federal spending since 2011, but it has been mostly ignored. Last week the Government Accountability Office (GAO) released a report saying that just 12 percent of more than 300 recommendations it issued since 2011 for addressing duplicative government programs have been carried out.
Preparing the (Doc) Fixings – Efforts to find a permanent solution to the Sustainable Growth Rate (SGR) – otherwise known as the “doc fix” – have picked up steam as of late with news that a fix would cost substantially less than previously estimated. The SGR is a scheduled sharp decrease in payments to physicians treating Medicare patients that has consistently been deferred due to oppositions from doctors and concerns it will impact care for Medicare recipients. The Ways and Means Committee held a hearing on the topic earlier this month and Republicans on the House Energy and Commerce Committee last week offered up a proposal. However, the plan does not deal with the key issue of how to pay for the $140 billion cost over ten years, though there are lots of options for finding savings elsewgere in the healthcare budget.
Feeling the Heat to Act – Budget gridlock continues as senators have engaged in a public spat over going to a conference committee to negotiate differences in the FY 2014 federal budget resolutions passed by the House and Senate. Meanwhile, appropriators including House Appropriations Committee chair Harold Rogers (R-KY) are not looking forward to continued battles over spending levels and are calling for replacing the automatic cuts of sequestration with a smarter approach. Sen. Roy Blunt (R-MO) joined those calls with a recent op-ed. This comes as more Americans indicate they are feeling the pinch from the sequester in a recent poll. Lawmakers face a deadline of September 30 to agree on a spending blueprint in order to avoid a government shutdown. That could roughly coincide with when the statutory debt limit will have to be raised in order to avoid a national default. Check out these and other impending fiscal speed bumps with our updated infographic. CRFB offers its insight on what should be a part of the discussions as policymakers seek to head off these scenarios in a new paper, including agreeing on a comprehensive fiscal framework well ahead of the deadlines.
Bernanke Prefers Slow Cook Approach – Federal Reserve chair Ben Bernanke is telling policymakers the high heat of sequestration cuts now will do little to address the unsustainable long-term debt picture. He suggests an approach that replaces some of the sequester cuts with savings that are more phased in over time and also more substantial. He says such an approach can promote the long-term economic growth and deficit reduction we need without derailing recovery in the near term.
Key Upcoming Dates (all times are ET)
- House Education and the Workforce hearing on the President's FY 2014 budget for the Department of Health and Human Services at 10 am.
- Bureau of Labor Statistics releases May 2013 employment data.
- House Budget Committee hearing on the FY 2014 budget and the Department of Defense at 1 pm.
- Deadline for estimated quarterly individual and corporate tax payments.
- Dept. of Labor's Bureau of Labor Statistics releases May 2013 Consumer Price Index data.
- Bureau of Economic Analysis releases third estimate of 2013 1st quarter GDP.
- The date Treasury Department expects a nearly $60 billion payment from Fannie Mae, which will help delay the time by which lawmakers will need to raise the debt ceiling.
- Bureau of Labor Statistics releases June 2013 employment data.
- Dept. of Labor's Bureau of Labor Statistics releases June 2013 Consumer Price Index data.
- Bureau of Economic Analysis releases advance estimate of 2013 2nd quarter GDP.