Line Items: Snowquester Edition
After the Storm – Winter Storm Saturn moved through the Washington, DC area on Wednesday and was given the nickname "Snowquester" by the inside-the-beltway crowd, named after the budget sequester that kicked in last week. After much hype the storm brought little snow within the Washington city limits, causing many to compare the storm to its namesake as an over-hyped event with little impact. Yet, locations just an hour west of the DC Metropolitan area saw snow accumulation of a foot or more. Is it possible the sequester will have a similar impact? While those inside the DC beltway bubble see little change, those outside it are significantly affected? Only time will tell.
Sequestration Blankets the Landscape – The automatic spending cuts of the sequester officially were triggered on Friday with an order from President Obama as the two sides could not agree on how to replace it. Dueling alternatives both failed in the Senate. The White House also provided some details on how the across-the board cuts will be implemented, with 9 percent cuts to domestic programs and 13 percent cuts to defense to achieve the total of $85 billion in cuts this year. Federal Reserve Chair Ben Bernanke recommended to legislators in congressional testimony that they replace sequestration with a smarter, long-term plan. “To address both the near- and longer-term issues, the Congress and the administration should consider replacing the sharp, front-loaded spending cuts required by the sequestration with policies that reduce the federal deficit more gradually in the near term but more substantially in the longer run.”
Plowing Into the Next Deadline – With the sequester hitting, policymakers moved right on to the next fiscal deadline, the March 27 expiration of the continuing resolution that is funding the federal government in lieu of a budget. The government will shut down without another stopgap measure or more detailed spending plan. While there is talk of using the opportunity as a vehicle to replace or at least alter the sequester, both parties are wary of causing a government shutdown. On Wednesday the House of Representatives passed a stopgap measure that factors in the sequester and provides more flexibility for defense and veterans programs to make the cuts mandated by the sequester. The Senate and White House will seek to expand the bill to provide similar flexibility to other programs. After they negotiate the latest drill, there are plenty more fiscal speed bumps ahead.
Blizzard of Budgets Coming – House Budget Committee Chair Paul Ryan (R-WI) says he plans to unveil his fiscal year 2014 budget blueprint next week. It will balance the budget in ten years. Senate Budget Committee Chair Patty Murray (D-WA) is working on a budget as well that could be released next week. Under a law passed earlier this year, members of Congress will have their pay withheld if their chamber does not pass a budget by April 15. While the two budgets will be worlds apart, the Washington Post points out that conference committee negotiations to reconcile the two approaches could possibly be the impetus for a bipartisan deficit deal. Meanwhile, the White House will not release its budget request until later in the month, possibly March 25. The White House missed the early February deadline for submitting a budget due to the fiscal cliff. Relatedly, on Tuesday the House passed a bill requiring that the annual budget submissions of the President provide an estimate of the cost per taxpayer of the deficit.
President Looks to Thaw Relations – President Obama reached out to rank-and-file Republicans this week with phone calls and dinner and will speak to both party’s caucuses on Capitol Hill. It is part of an effort to bypass the party leadership in garnering support for a deficit deal. The outreach comes as some Republican lawmakers have suggested they would be willing to accept additional tax revenue as a part of a grand bargain and as the President has reiterated his support for entitlement reforms as a part of a deal.
Tax Reform Snowballs – Fundamental tax reform may be the best vehicle for generating bipartisan support for more revenue. The Simpson-Bowles plan showed the way for tax reform that can simplify the tax code, lower rates, and reduce the deficit by eliminating or limiting tax credits, deductions and other loopholes known as tax expenditures. Senator Murray held a Budget Committee hearing on the topic on Tuesday, and her budget proposal may include reconciliation instructions for tax reform, which would make it easier to pass by making it filibuster-proof. Meanwhile, both the House and Senate tax-writing committees are pushing a coordinated reform effort, and Speaker Boehner says that tax reform will be designated a H.R. 1 in the House, a sign that it is a priority. Economists are also signaling support for tax reform.
Key Upcoming Dates (all times are ET)
- Dept. of Labor's Bureau of Labor Statistics releases February 2013 employment data.
- Dept. of Labor's Bureau of Labor Statistics releases February 2013 Consumer Price Index data.
- Current continuing resolution (CR) funding the federal government expires.
- Bureau of Economic Analysis releases third estimate of 2012 4th quarter and annual GDP.
- Dept. of Labor's Bureau of Labor Statistics releases March 2013 employment data.
- Congress must pass a budget resolution as specified in the Congressional Budget Act. Also, due to the debt ceiling suspension bill, lawmakers will have their pay withheld after this date until their respective chamber passes a resolution.
- Dept. of Labor's Bureau of Labor Statistics releases March 2013 Consumer Price Index data.
- Bureau of Economic Analysis releases advance estimate of 2013 1st quarter GDP.
- Dept. of Labor's Bureau of Labor Statistics releases April 2013 employment data.
- Dept. of Labor's Bureau of Labor Statistics releases April 2013 Consumer Price Index data.
- 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.