‘Line’ Items: Hoops, Blossoms and Canaries
Health Care Makes it Through the Final Hoops – Congress completed work last week on the reconciliation package, which included fixes to the health care legislation that was previously enacted – ending a March of madness in Washington. The reconciliation bill bounced between the Senate and House to make a few minor changes. The president is expected to sign it tomorrow.
What Will Blossom After Health Care? – Congress is in recess; the lawmakers are gone from Washington, replaced by a multitude of tourists in town to take in the Cherry Blossoms. With congressional action on health care now complete, legislators are back home hearing from their constituents and asking themselves “now what?” When they return the week of April 19 they will find a host of issues waiting for them.
Next Stop, Wall Street – With momentum now on his side, President Obama aims to use it. The White House has indicated it wants to complete an overhaul of financial sector regulation by September; before Memorial Day if possible.
Still All About the Jobs – Congress will continue its “jobs agenda” when it returns. The House will take up HR 4849, a small business and infrastructure bill reported by the Ways and Means Committee last week that will extend the Build America Bonds program to March 2013, provide capital gains tax relief for small businesses and add $2.5 billion in safety-net spending. The chamber last week passed HR 4899, which makes supplemental FY 2010 appropriations for disaster relief and summer jobs.
Offsets Are Off-Putting – The Senate was unable to agree on a temporary extension of expanded unemployment and COBRA benefits before it left town, meaning that they will expire before Congress returns. Republicans led by Senator Tom Coburn (R-OK) demand that the extension be paid-for. An agreement by Senate leaders to pass a one-week extension paid for with stimulus funds was nixed by House Democrats. Congress must come to grips with the fact that difficult decisions must be made. The most painless offsets are quickly disappearing and deeming everything “emergency” spending that is exempt from PAYGO rules is not acceptable. Paying for what it wants to do should not be such an exotic concept for Congress.
Presidential Commission is Set – House Democrats made their selections and an executive director was chosen for the White House fiscal commission. Budget Committee Chairman John Spratt (D-SC) and Representatives Xavier Becerra (D-CA) and Jan Schakowsky (D-IL) were the picks of the House Democratic leadership and the president chose Democratic Leadership Council CEO Bruce Reed to be the executive director. Those selections round out the commission membership, which can now get to work on making recommendations due by the end of the year to reduce the deficit.
Social Security Back in the Limelight – One of the issues the commission is likely to explore is Social Security. The New York Times last week highlighted CBO projections indicating that it will pay out more in benefits than it receives in revenues this year because of the recession, which the Bottom Line pointed out weeks before. Separately the Times said Social Security may provide an area for a grand compromise.
A Taxing Debate Ahead – A hearing of the House Ways and Means Committee last week underscored the severity of our fiscal dilemma and its implications. American Action Forum president and CRFB board member Douglas Holtz-Eakin testified that “the budgetary outlook is a threat to the very foundations of the U.S. economy.” Leonard Burman of Syracuse University and Robert Greenstein of the Center for Budget and Policy Priorities were in agreement that both spending and revenues would have to be part of the equation in putting the U.S. on a sustainable fiscal path. The fiscal outlook will undeniably play a substantial role in shaping upcoming debates on extending the Bush tax cuts and fundamental tax reform. CRFB president Maya MacGuineas was quoted in CongressDaily (subscription required) that exempting a permanent extension of the tax cuts for the middle class from PAYGO "is absolutely an absurd conclusion based on the mountain of debt we face."
This Canary Ain’t Singing – Former Federal Reserve Chairman Alan Greenspan last week said that higher yields on government bonds are the “canary in the mine.” He said that rising yields reflect “this huge overhang of federal debt which we have never seen before” and will drive up the costs of American borrowing.