CR and Sequester Update

Posted on October 29, 2012

Members of Congress are discussing the possibility of approving a continuing resolution (CR) for the entire fiscal year to avoid partisan political battles and a possible government shutdown. Appropriators continue to press for completing this year’s spending bills in a lame-duck omnibus, but it’s more likely that they will be left for the next Congress. However, leaders in the 113th Congress are likely to be immersed in fights over the debt limit and tax policy next spring and may well opt for another six-month CR that would cover the rest of the fiscal year. The current CR (PL 112-175) expires on March 27, 2013.

On the sequester front, President Obama is speaking with confidence about a “grand bargain” on raising taxes and reducing the deficit that could be reached within six months if he’s re-elected. Mitt Romney, on the other hand, is reiterating his plan to increase defense spending and repeal the 2010 health care overhaul law to help balance the budget. Obama’s allusion to a six-month timeline for a budget agreement suggests that he agrees with many lawmakers and outside observers who say that a large deal will be impossible in a lame-duck session of Congress. Some lawmakers and analysts have said Congress should agree to a small package of budget cuts and establish the framework of a bigger package in the lame duck.

There are just eight days until the election, the result of which will certainly shape the agenda for the lame duck session and early months of the next Congress.

Source: CQ Budget Tracker

Economic Outlook for 2013

Posted on August 29, 2012October 17, 2012

The Congressional Budget Office (CBO) yesterday released its updated “Budget and Economic Outlook: Fiscal Years 2012 to 2022.” According to CBO:

“For fiscal year 2012 (which ends on September 30), the federal budget deficit will total $1.1 trillion, CBO estimates, marking the fourth year in a row with a deficit of more than $1 trillion. That projection is down slightly from the $1.2 trillion deficit that CBO projected in March. At 7.3 percent of gross domestic product (GDP), this year’s deficit will be three-quarters as large as the deficit in 2009 when measured relative to the size of the economy. Federal debt held by the public will reach 73 percent of GDP by the end of this fiscal year—the highest level since 1950 and about twice the share that it measured at the end of 2007, before the financial crisis and recent recession.”

In addition, CBO projects that the nation will enter into a deep recession in 2013 if Congress fails to address the sequester and the expiring Bush tax cuts. CBO also suggests that going over the “fiscal cliff” would disrupt economic progress, reduce real GDP by 0.5 percent, and push unemployment over 9.1 percent.

The outlook is darker than the forecast the agency released in January, when CBO predicted that the fiscal cliff would trigger a modest recession in the first half of 2013, followed by a quick recovery. The expiring “extenders” package for unemployment benefits and payroll tax holiday, coupled with a weaker economy has made the 2013 outlook more dire. Reactions and analyses of CBO’s report are available from the Center for Budget and Policy Priorities, and the Bipartisan Policy Center.

Sequester “Line in the Sand” Bills

Posted on July 17, 2012October 17, 2012

Senate Democrats are warning that they will not agree to a deal to stop across-the-board spending cuts early next year (sequester) without new revenue gained by ending tax breaks on the wealthiest Americans. To that end, they circulated a draft bill yesterday that would spare most Americans from higher tax rates that are due to take effect on January 1, 2013, but the bill would allow the Bush tax cuts to expire on annual household income greater than $250,000 and raise the rate on dividends and capital gains from the current 15 percent to 20 percent. The Senate will vote before the August recess on the Democrats’ tax bill, which also would preserve current tax rates on household income under $250,000 and individual income under $200,000. The House Republicans plan their own vote this month to extend all of the Bush-era tax cuts. But the votes in both chambers will be symbolic, as neither party will be able to get the 60 votes needed to advance its plan in the Senate.

Both measures are seen as “lines in the sand” for the big negotiation that will take place after the November elections during the “lame duck” session that will include new rounds of negotiations on the many large fiscal issues facing the country, including the broad array of expiring tax cuts and automatic across-the-board spending reductions known as the sequester.

Indeed, US Senator Patty Murray (D-WA) said Monday her party would allow ALL current tax rates to expire on December 31^strather than accept a deal with Republicans for averting the sequester that doesn’t include additional revenue from more affluent Americans. “If we can’t get a good deal, a balanced deal that calls on the wealthy to pay their fair share, then I will absolutely continue this debate into 2013, rather than lock in a long-term deal this year that throws middle-class families under the bus,” Murray said in a speech yesterday.

Odds and Ends for the Week

Posted on June 22, 2012October 17, 2012

Student Loan Interest Rates: Majority Leader Harry Reid and Minority Leader Mitch McConnell are getting close to a deal to prevent student loan rates from doubling on July 1^st, from 3.4 percent up to 6.8 percent. A deal could be announced as soon as today, although early next week seems more likely. The talks have centered on how to pay the roughly $6 billion it will cost to keep the interest rate on federal Stafford loans at 3.4 percent. Unless Congress intervenes, rates would increase to 6.8 percent starting July 1^st. The list of options Reid and McConnell are considering include one favored by Reid that would tweak pension payment contributions by employers and increase premiums paid by businesses for Pension Benefit Guaranty Corp. coverage. The House will evaluate the proposal once the Senate reaches a deal, but they will not yet confirm support for Reid’s proposed pay-for.

Highway and Transit Programs: Transportation bill conferees are getting closer to a deal on legislation to reauthorize federal highway and transit programs. Congressional staff are expected to work through the weekend to try and hammer out a final agreement. When that is completed, some conferees will get back together on Tuesday when the House returns from a long weekend away. Lawmakers are racing against the clock as the current extension expires on June 30^th, the same day that Congress is expected to recess for the Fourth of July week. It is expected that staff is also drafting a 6-month extension measure in case Congressional members cannot reach agreement on the larger reauthorization bill.

End-of-Year “Fiscal Cliff”: The cuts through sequestration are just one of a number of high-profile fiscal issues that Congress will need to address after the November election. The Bush tax rates are set to expire at the end of the year, and it’s likely that Congress will have to raise the debt ceiling again. This is the same issue that faced Congress last August that put the Budget Control Act and sequestration in place. Both Democrats and Republicans have said publicly that they want to avert the across-the-board sequestration cuts, which would hit roughly $500 billion each to defense and non-defense discretionary spending over the next decade. But the two sides have been unable to reach a deal about how to find alternative deficit reduction to replace the cuts, as Republicans are opposed to raising taxes and Democrats are hesitant to cut entitlement spending.

This Week in Congress

Posted on April 16, 2012October 17, 2012

Congress is back in session today after a two-week break for the Easter holiday. Appropriators in both chambers will begin moving FY 2013 annual appropriations bills this week. The House Appropriations Committee on Wednesday will start marking up its spending bills for FY 2013 with a goal of cutting federal spending by a little more than one percent, or $15 billion. Senate appropriators, on the other hand, will begin their markups with a slightly more generous target that would still keep annual discretionary spending relatively flat. Senate subcommittees begin the process on Tuesday with the Commerce-Justice-Science and Transportation-Housing and Urban Development measures. The House Energy-Water subcommittee will meet Wednesday and the Commerce-Justice-Science panel is expected to meet Thursday. Under House rules, the draft bills will be made public 24 hours in advance of the markups; the Senate does not have a requirement for an early look.

Appropriators have yet to announce plans for writing the massive Labor-HHS-Education spending bill, which is always among the last and most controversial funding measures to move. The bill faces an additional challenge this year with the pending Supreme Court ruling on health care reform due in June. House appropriators might wait until after the ruling to move the bill. Meanwhile in the Senate expects the court will uphold the law and plans to write its spending bill assuming health reform will remain intact.

Tuesday

The Senate Appropriations Committee will hold subcommittee markups of its Commerce, Justice, Science FY 2013 spending bill and its Transportation, Housing and Urban Development FY 2013 spending bill.
The Senate Armed Services Committee will hold a subcommittee hearing on the health and status of the Department of Defense science and technology laboratories and enterprise.

Wednesday

The House Appropriations Energy and Water Subcommittee will mark up its Energy and Water Development FY 2013 spending bill.
The House Energy and Commerce Committee will hold subcommittee hearings on budget and spending concerns at the DOE and FDA User Fees 2012: How Innovation Helps Patients and Jobs.
The House Science, Space, and Technology Committee will hold subcommittee hearings on NSF Major Multi-User Research Facilities Management and Growing the Wireless Economy through Innovation.

Thursday

The House Homeland Security Committee will hold a subcommittee hearing on the Department of Homeland Security (DHS) and DOE National Labs: Finding Efficiencies and Optimizing Outputs in Homeland Security Research and Development.
The House Science, Space, and Technology Committee will hold a subcommittee hearing on Impact of Tax Policies on the Commercial Application of Renewable Energy Technology.
The American Chemical Society will hold a Capitol Hill briefing on Cybersecurity and Smart Infrastructure: Ensuring Resilience and Deterrence.