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News and updates

Budget Discussions Begin (Again) this Week

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Both the House and Senate are in session this week. The Senate is expected to consider energy efficiency and pharmacy compounding legislation, as well as a labor board nominee. The House will consider a resolution disapproving of the debt ceiling increase as well as financial services measures.

But the big show begins on Wednesday as the House and Senate kick off their conference on the FY2014 budget resolutions at 10:00am. Both parties are downplaying their hopes for a broad deal in budget talks that begin on Wednesday, suggesting they would settle for a more narrow accord on FY2014 spending that averts automatic spending cuts due early next year (sequestration). Only $19 billion separates the $986 billion discretionary spending level for FY2013, which has been extended until January 15th, and the $967 billion FY2014 limit set under the sequester rules enacted in the 2011 Budget Control Act. Democrats on the conference committee are unlikely to settle for any top-line discretionary figure lower than $986 billion, while Republicans insist any agreement to raise spending above the post-sequester $967 billion level must offset at least some of the increase with longer-term spending cuts.

It is still to early to predict what might come of this latest round of budget negotiations, but familiar themes related to taxes and entitlements will certainly come back up as they attempt to reach some sort of deal. And a year-long CR is not out of the question as appropriators cannot continue work on FY2014 bills until they have some clarity on top-line budget numbers.

Next US Under Secretary of Education?

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Unconfirmed rumors are that Ted Mitchell will be nominated as the next US Under Secretary of Education, replacing Martha Kanter. Mitchell is currently the CEO of NewSchools Venture Fund and the former President of Occidental College. While Kanter’s career has focused on higher education issues, Mitchell’s background is more focused on K-12 issues. The White House has not yet confirmed this information.

Shutdown Over but Fiscal Issues Remain

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The most recent fiscal crisis has been resolved, government is reopened, and the nation’s debt limit has been raised sufficiently to cover our bills. But that doesn’t mean that the broader fiscal issues aren’t still front and center. The next budget fights and political battles are beginning to take shape as all sides are now focusing on a “balanced” year-end budget deal – or grand bargain. Lawmakers are preparing for the first budget conference committee in four years with our own US Senator Patty Murray (D-WA) leading the charge for the Senate. Rep. Paul Ryan (R-WI) will take the lead for the House. The big question for that conference committee is whether they can even agree on how to reconcile the differences between the House and Senate budget measures – a difference of $91 billion. Neither side has yet agreed to using reconciliation.

The reconciliation process allows for adding instructions to a budget resolution that direct conference committees to submit legislation changing existing law, including tax and budget laws, with specified savings and spending targets. It also allows for that legislation to bypass Senate filibusters.

Regardless, the recent history of budget negotiations suggest it will be difficult to overcome the obstacles that have held back budget agreements for the past four years.

Welcome Back, Federal Government!

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The metro was packed this morning, traffic was slow, and DC was once again busy with activity – all welcome signs that the Federal Government is open as a couple hundred thousand federal employees made their way into work for the first time since September 30th.

The Senate released a last minute deal yesterday afternoon and subsequently voted 81-18 in favor of passing the legislation. The House pulled through with a late-night vote of 285-144 and sent the bill to the President’s desk for signature shortly after midnight last night.

The key parameters of the deal are:

  • Extends spending through January 15th at current levels
  • Raises the debt ceiling enough to fund the government through February 7th
  • Healthcare subsidies for Members and Staff
  • Furloughed workers will get back pay
  • Established a budget conference committee that must report out a spending plan to both chambers by December 13th

Also included in the bill are: $2.2 billion in appropriations for a Kentucky River project, $450 million in flood recovery funds for Colorado, a death benefit payment to the widow of late Senator Frank Lautenberg, a bump in funding for a handful of government agencies, and a provision stating that there will be no cost of living adjustment for members of Congress next year.

Of course, this is all just a short-term fix, and we could easily find ourselves facing a shutdown and threat of default again in January.

Shutdown: Day 16 and Default Looming

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Negotiations broke down (again) yesterday as the House GOP leadership failed to find enough support among their caucus to move forward two separate proposals to end the shutdown and raise the nation’s debt limit. All eyes are on the Senate as they resume negotiations. The tentative deal under discussion in the Senate would reopen the government by extending current funding levels of $986 billion through January 15th, lift the debt ceiling until February 7th, and start a budget conference with instructions that it report a broader budget deal by December 13th. The December date is significant because it would give Congress time between now and then to negotiate a broader budget agreement to potentially modify or end sequestration before the next round of cuts are scheduled to hit in January.

The deal being discussed is expected to contain a single change in the 2010 health care law: stricter efforts to verify the income of individuals who apply for subsidies under the Affordable Care Act. The proposal would also allow the Treasury Department to use extraordinary measures when approaching a future debt limit. And finally there is support in both parties for a provision that would give agencies more flexibility to implement future sequestration cuts rather than just applying those cuts across-the-board.

Meanwhile, financial markets and credit ratings agencies are monitoring the action on Capitol Hill for any signs of a standoff that could lead to default. There is great uncertainty over when exactly the Treasury Department would run out of money if there is a default. Treasury Secretary Jacob Lew has said the government would only have $30 billion in cash on hand beyond Thursday to meet obligations.