Line Items: Sequester Gestures Edition
Side-Stepping Sequestration – It was as predictable as the Washington Capitals blowing a playoff series lead. Lawmakers are looking to carve out exemptions to sequestration, including areas such as Head Start and medical research. The piecemeal approach to dealing with the sequester is not the way to go. Former Pennsylvania governor and Fix the Debt co-chair Ed Rendell, has a better idea -- replace sequestration with a comprehensive debt plan. Meanwhile, the Pentagon announced Tuesday it will furlough around 650,000 civilian employees for 11 days. It was able to reduce the number of furlough days by finding additional savings elsewhere in it budget.
Debt Ceiling Rising Back Up As Issue – The current suspension of the statutory debt ceiling will be lifted on May 18. Though it will no longer be suspended, it’s still up in the air as to when it will need to be increased. Additional revenue from economic growth and the fiscal cliff deal along with spending cuts and payments from Fannie Mae and Freddie Mac are slowing the growth of the debt. Coupled with the “extraordinary measures” Treasury can employ to put off the debt limit, it will be at least until Labor Day and possibly as late as November before policymakers have to seriously wrestle with increasing the debt limit. Last week, the House passed legislation prioritizing payments on the debt and Social Security of the debt limit is reached. The White House has promised to veto the bill, which isn’t expected to pass the Senate. House Republicans will meet Wednesday to discuss their strategy on the issue going forward. We argue that we cannot put off work towards a comprehensive fiscal plan until another debt limit crisis is right in front of us. Doing so would likely result in solutions that are suboptimal or are gimmicks that don’t adequately address the issue. Keep track of debt ceiling developments here.
Support Grows for Budget Conference – The budget process could be the vehicle for negotiating a fiscal deal well ahead of the debt ceiling fight. Both the House and Senate have passed budgets for next year, but lawmakers have not taken the next step in forming a conference committee to work out the differences in the two budgets. But more Republicans in the Senate are joining Democrats in calling for a conference committee to get to work now.
Appropriations Process Gets Under Way – Under law Congress can begin considering spending bills even without a concurrent budget resolution on May 15 and lawmakers don’t seem to be wasting any time getting the process started. House Appropriations subcommittees will begin marking up spending bills Wednesday. Congress will likely need all the time it can get to agree on spending bills ahead of the new fiscal year beginning October 1 since the House and Senate begin far apart on the topline spending numbers. The House set the spending level at $967 billion, figuring that sequestration will remain in effect. The Senate assumes the sequester will be repealed, putting spending at $1.059 trillion.
CBO Sheds Light on Budget and Economic Situation – The Congressional Budget Office (CBO) on Tuesday updated its ten-year projections of the budget and economic outlook. It estimates that the federal budget deficit for fiscal year 2013 will be $642 billion and that deficits will fall in the near term, only to begin rising again by the end of the decade “because of the pressures of an aging population, rising health care costs, an expansion of federal subsidies for health insurance, and growing interest payments on federal debt.” As we note, our debt problems are far from solved and the improved short-term numbers are no excuse to stop working towards a comprehensive fiscal plan that addresses the long-term debt. On Friday, CBO will release its analysis on President Obama’s fiscal year 2014 budget request. Stay tuned for analysis from CRFB on both reports.
Your Chance to Shape Tax Reform – Senate Finance Committee chair Max Baucus (D-MT) and House Ways and Means Committee chair Dave Camp (R-MI) continue their bicameral, bipartisan tax reform effort and they are now looking for public input. Last week, they launched a website at taxreform.gov that allows people to share their stories and ideas for reform. They also have a Twitter account @simplertaxes. Interested in corporate tax reform? Try out our simulator for ideas.
The Case for Chained CPI – Switching to a more accurate measure of inflation received support from two chairs of the White house Council of Economic Advisors. Martin Neil Baily, who served in the Clinton Administration and Glenn Hubbard, who served under George W. Bush wrote in an op-ed in The Hill, "As economists from opposite ends of the political spectrum, we would strongly urge the president and leaders in Congress to continue to support moving to chained CPI, which represents the most accurate available measure of inflation and cost-of-living increases. Switching to this more accurate measure of inflation represents the right technical, fiscal and retirement policy — and policymakers should not delay any further in making this improvement." CRFB’s Marc Goldwein and Ed Lorenzen made a similar case recently in an op-ed of their own.
Farm Bill Moves In Senate – The Senate Agriculture Committee Tuesday approved a new farm bill that would reduce deficits by about $18 billion over ten years. The House is considering a version that would save more, but the primary difference is cuts in nutrition programs such as food stamps.
Immigration Reform and the Budget – Immigration reform has risen to the top of the congressional agenda. The Senate Judiciary Committee is in the process of marking up a bipartisan comprehensive overhaul of the immigration system. The increased focus has brought attention on how immigration reform would affect the budget. CBO says it will utilize some dynamic scoring to estimate the budgetary impact of reform because it will have such a broad effect on the labor market. Also, the chief actuary of the Social security Administration estimates that reform would improve Social Security’s finances because it would result in more workers contributing to the program.
Budget Reform Ideas Emerge – Once again problems in moving a budget through Congress underscore how broken the process has become. Likewise, ideas for fixing the process are reemerging, such as biennial budgeting. See more ideas here.
Key Upcoming Dates (all times are ET)
- 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.
- Hose Ways and Means subcommittee hearing on Medicare reform at 10 am.
- Senate Budget Committee hearing on the nomination of Brian Deese to be deputy director of the Office of Management and Budget at 10:30 am.
- 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.
- Bureau of Labor Statistics releases May 2013 employment data.
- 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.