‘Line’ Items: Presidents Day Edition
Day of Leaders – Today we celebrate great American leaders with mattress sales and a day off (for some) from work. Congress left town for the whole week. We at the Bottom Line honor the day by calling for the type of leadership embodied by the likes of Washington and Lincoln in dealing with our fiscal challenges. Last week both the White House and Capitol Hill put forth proposals that have much to be desired, meanwhile a bipartisan group of senators is negotiating on the type of comprehensive solution that the nation needs.
White House Budget Shows a Deficit of Solutions – The budget request for the 2012 fiscal year that President Obama unveiled last week was underwhelming for many budget hawks. Labeled as a “down payment” on fiscal sustainability, it seeks to stabilize the debt at 77 percent of GDP. But CRFB argues that the economic assumptions used to get to that level may be too rosy and the level of debt is still too high. In our analysis we conclude:
There is no substitute for strong leadership from the White House on an issue as serious as our fiscal challenges. Yet, there can be a way through this mess. The White House must work with lawmakers this year to enact a budget and fiscal plan that goes further than what they propose here. The country needs a credible plan to get us out of the enormous fiscal hole we’ve dug for ourselves.
House Makes Lots of Cuts, Little Progress – The House of Representatives last week considered the as-yet-unresolved budget for this year in looking for savings. It passed a bill that would fund the federal government for the rest of fiscal year 2011, with non-security spending at 2008 levels. It cuts about $61 billion from current spending levels. While the legislation contains some deep cuts to discretionary spending, like the president’s budget it doesn’t seriously confront the largest drivers of our long-term debt – namely defense spending, entitlements and revenues. House leaders did say that their FY 2012 budget will include entitlement reform.
Senate Group Fills the Void – Fortunately, a bipartisan group of senators seeks to fill the leadership vacuum. They are in the process of negotiating a comprehensive fiscal plan along the lines of the recommendations of the White House Fiscal Commission. The group’s efforts have caught the attention of interests on both ends of the political spectrum. A conservative group sent a letter to Republican members participating in the talks warning them that any net tax increase in such a plan would go against their “no new taxes” pledge. The senators responded with a letter of their own explaining the need for “carefully examining every corner of the federal budget and making difficult choices.” The senators conclude:
Our pledge is to protect taxpayers, not special interests. To do so we must analyze every aspect of the federal budget, including the tax code.
Budget Wreck Could be Coming – Funding government operations for the rest of the year could get more exciting than Sunday’s last lap at Daytona. The bill approved by the House last week stands little chance of passing the Senate, and President Obama has promised to veto it if it does. The current continuing resolution funding the federal government expires on March 4 and must be extended by then. House leaders have said that they will only support a short-term extension if it includes spending reductions.
Spending Reduction Committee Proposed – Rep. Jeff Duncan (R-SC) has introduced legislation to establish a “Committee on the Elimination of Nonessential Federal Programs.” The proposal is modeled after the “Byrd Committee” – named after former Senator Harry F. Byrd (D-VA), who chaired the joint congressional committee – that operated from 1941 to 1974. It would target federal government programs that are duplicative, underperforming or nonessential for modification or elimination.
Key Upcoming Dates
February 21 (Today!) – Deadline for submitting entries to CRFB's "Voices of America" fiscal video contest.
February 22 – Conference Board Releases Consumer Confidence Index.
February 24 – Durable goods orders data for January from the Commerce Department.
February 24 – Weekly unemployment claims data released by the Department of Labor.
February 25 – Fourth Quarter GDP, 2nd estimate – Commerce Department.
February 25 – Consumer Sentiment Index – University of Michigan.
March 4 – 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.
April 5 - May 31 – Period in which Treasury Secretary Geithner says the U.S. will likely reach the debt ceiling.