Line Items: New Year, No Resolutions Yet Edition
Not a Rockin’ Eve – Monday is New Year’s Eve...fiscally speaking as October 1 marks the beginning of Fiscal Year 2014. There may be a countdown, and a ball might even be dropped, but there will be no celebrating. Congress looks to go down to the wire in approving a continuing resolution that will fund the federal government in the new fiscal year. Instead of a New Years Rockin’ Eve, it will be more of a Blockin’ Eve as the House and Senate reject each other’s bills. Without a stopgap measure in place before midnight Monday, the government will shut down. Fighting over non-appropriations matters, namely the health care law, could cause Congress to drop the ball on a basic duty, funding the government. Even if a stopgap is approved before the deadline, little will be resolved since it will be for a very short period of time, meaning we would soon be back at this again. If only the late, great Dick Clark were still with us, we could send him to Washington to produce something much better.
Empty New Year’s Resolutions – Many of us have been guilty of making half-hearted New Year’s resolutions, but Congress is taking it to a new level. The House of Representatives and Senate have traded a series of continuing resolutions (CR) that each knows the other will not support. Early Sunday morning, the House passed a CR funding the federal government through December 15 while delaying the implementation of the Affordable Care Act (the health care reform law) for a year and repealing a tax on medical devices contained in the law. The Senate on Friday approved a CR lasting until November 15 without the health care and medical device tax provisions. Senate Majority Leader Harry Reid (D-NV) said the Senate will not approve the House bill and the White House promised a veto even if it did make it that far. The federal government will shut down when the current fiscal year ends at midnight tonight if policymakers cannot agree on a funding bill. Political posturing has prevented the budget and appropriations process from setting a clear fiscal path for the country. The current debate has been hijacked by outside issues instead of the fiscal matters that should be addressed. Short-term stopgap measures are taking the place of a longer term budget and spending framework. Policymakers must use the process to deal with the core budget challenges facing the country. We provided a blueprint here. With a government shutdown a distinct possibility, check out our answers to some key shutdown questions here.
Debt Limit Hangover Awaits – Just a couple weeks into the new fiscal year policymakers will have to deal with an even more consequential deadline regarding the statutory debt ceiling. Treasury Secretary Jack Lew says that he will exhaust “extraordinary measures” now being employed to avoid surpassing the limit by October 17, leaving Treasury with just $30 billion of cash on hand, and the Congressional Budget Office (CBO) says there will be no more room for maneuvering (including cash on hand) sometime between October 22-31. The same political brinksmanship plaguing the government funding discussion threatens to derail raising the debt limit, which would have even more severe repercussions than a government shutdown. Follow debt ceiling developments here.
Will We Resolve to Address the Debt? – The recent Long-Term Budget Outlook from the Congressional Budget Office (CBO) shows that, despite deficits coming down in the short term, the national debt remains a big problem in the long term. CBO projects that debt will reach 100 percent of the economy by 2038 and continue rising. CBO points out that debt at those levels will adversely impact the economy. Higher interest rates will affect private investment; increased payments to service the debt will crowd out public investments in areas such as education and infrastructure; higher debt means less flexibility to respond to problems that may arise; and debt could trigger a crisis of its own. In fact, interest on the debt is the fastest growing part of the federal budget under CBO’s projections. CRFB has updated its own Realistic Baseline in light of the new CBO numbers, and it isn’t a pretty picture. Under our base scenario, debt could reach 150 percent of GDP by 2050 and will continue rising. Factoring in these projections, we calculate that an additional $2.2 trillion in deficit savings over the next decade will be required to put the debt on a downward path. Looking out farther, the numbers are more daunting, requiring $13.5 trillion in deficit reduction over the next twenty years, or about 2.4 percent of GDP. In light of these numbers, the current debate in Washington seems quite trivial. The Peter G. Peterson Foundation takes a look at the fiscal deadlines facing the country and how they fit into the big picture.
Defending Against Debt – While serving as chairman of the Joint Chiefs of Staff, Adm. Mike Mullen said, “the most significant threat to our national security is our debt.” And the military has been called into action to confront it. Defense spending reductions account for half of the automatic cuts under sequestration. A new report from the Stimson Center offers specific recommendation for reducing defense spending without "hollowing out" the military.
Key Upcoming Dates (all times are ET)
- Fiscal Year 2014 begins. A continuing resolution must be approved by this date in order to prevent a government shutdown.
- 100th Anniversary of the Revenue Act of 1913, which instituted the federal individual income tax.
- Bureau of Labor Statistics releases September 2013 employment data.
- Bureau of Labor Statistics releases September 2013 Consumer Price Index data.
- The date when Treasury Secretary Jack Lew estimates that extraordinary borrowing measures will be exhausted and the government will breach the debt ceiling.
October 18 - November 5
- Time range in which the Bipartisan Policy Center estimates the statutory debt ceiling will be breached. A national default will occur unless the debt limit is raised before that point.
- Bureau of Economic Analysis releases advance estimate of 3rd quarter GDP.