Committee for a Responsible Federal Budget

Line Items: Draft Edition

Apr 25, 2013

Making the Call – The NFL Draft kicks off Thursday. Unlike previous drafts, there is much uncertainty as to who will go where. Washington is in a similar situation where it is unclear what direction policymakers will take. There’s no clear # 1 pick – immigration, terrorism, economy, budget, tax reform are all vying for the top spot on the agenda. Who will get the call next?

Sequestration Rises Up the List – It didn’t make a good impression at the combine when it officially took effect on March 1 without much noticeable effect and most businesses reported that it had minimal impact so far, but the across-the-board spending cuts of sequestration have been getting a second look this week as furloughs of some federal employees have begun. Namely, furloughs of air traffic controllers have been blamed for airline delays around the country, prompting policymakers to revive efforts to improve or eliminate it. Of course, there is still not much agreement on how to do so as senators blocked competing bills this week. Republicans were unable to move a bill that would grant President Obama more flexibility in how the cuts are made while Senate Majority Leader Harry Reid (D-NV) failed to advance his bill to replace sequestration and pay for it with savings from the drawdown of U.S. military operations in Afghanistan. The war savings offset is a gimmick since the drawdown is already scheduled to occur. CRFB spoke out against using this gimmick in a statement, “We should certainly replace the mindless, across-the-board cuts in the sequester -- but with an intelligent deficit reduction plan, not phantom savings from a drawdown that is already taking place.” President Obama said he supports the Reid approach as a temporary measure to buy time to find agreement on a more balanced package to replace sequestration. The sequester should be replaced by a comprehensive approach that deals with all parts of the budget and is phased in over time as to not disrupt the economic recovery. Learn more on our Sequestration Resource Page

Simpson and Bowles Redraft – Fiscal Commission co-chairs Alan Simpson and Erskine Bowles last week offered up an example of the type of approach that is needed to replace sequestration. They released a detailed version of the framework they offered earlier this year, “A Bipartisan Path Forward to Securing America’s Future,” that would save $2.5 trillion over the next decade by tapping all areas of the budget including entitlements and tax reform. In the preamble, Simpson and Bowles say of sequestration, “We believe there is a better way, and we believe it is politically possible to get there.” The plan draws on areas that can achieve bipartisan support and is designed to protect the most vulnerable and to promote long-term growth while not derailing the short-term recovery. See our analysis of the plan, a summary of the plan and the full report.

Budget on the Clock – The House and Senate passed vastly different budgets for the next fiscal year that will be difficult to reconcile, but the process has not formally begun yet as lawmakers bicker. Sen. Reid tried to force the issue this week by naming members to the conference committee to reconcile the two bills, but Republicans in the Senate blocked his effort. They want to set some ground rules in advance before the conference committee starts its work. The budget conference process could be the vehicle for negotiations on a larger deficit reduction plan and if the House and Senate can agree on a budget/deficit reduction plan House Republicans are said to be considering using the budget reconciliation rules to pass a debt ceiling increase that can’t be filibustered. Moving forward with the budget process could pave the way to a deal that reins in the national debt. 

Building a Deficit Deal Team – In addition the budget process, efforts to advance a bipartisan deficit deal are proceeding on multiple fronts. President Obama continued his outreach to lawmakers with a dinner with the 20 women in the Senate where he encouraged them to be active in the deficit discussion. Meanwhile, the White House is trying to recruit Republican senators who could work on a “grand bargain” addressing the debt. As a part of the effort, top Obama Administration officials met with some GOP senators on Thursday.  

Tax Reform Stock Rises – Senate Finance Committee chair Max Baucus (D-MT) announcing his retirement this week could mean a boost for efforts to fundamentally reform the tax code as the key player will be unfettered by reelection concerns and will be seeking a legacy. Meanwhile, Republicans in the House are beginning their tax reform efforts in earnest with meetings to get members of the caucus on board. Reform that deals with tax expenditures is critical to a comprehensive deficit approach and could help facilitate a grand bargain. 

Moving the Chained CPI – Some Democrats in Congress continue to push back against switching to a more accurate measure of inflation known as chained CPI as proposed in President Obama’s budget. This week Sens. Bernie Sanders (I-VT) and Tom Harkin (D-IA) introduced a resolution opposing the switch for Social Security and some Democrats in the House voiced opposition in a letter to the White House. CRFB’s Maya MacGuineas argued that “It is irresponsible and counterproductive to take a common sense and bipartisan option off the table” in a statement. Meanwhile, the Center on Budget and Policy Priorities analyzed the President’s chained CPI proposal and the Congressional Budget Office found that another inflation index supported by some needs more work. The pressure to take a modest, technical fix off the table without considering its merits illustrates why it is so difficult to address the mounting national debt. To learn more about the topic, check out our Chained CPI Resource Page and watch this video.

OMB Drafts New Director – Sylvia Mathews Burwell was confirmed by the Senate this week to be the new director of the Office of Management and Budget (OMB). She takes over at a critical time and will be a key part of negotiations over the federal budget and reducing the deficit.

Debt Limit Declares – Not to be left out, the debt ceiling is jumping back on the agenda. The House Ways and Means Committee approved of a bill supported by Republican leaders that would direct the Department of the Treasury to prioritize making payments to service the debt and Social Security benefits in the case the statutory debt limit is reached. The legislation is intended to prevent a U.S. default in case the debt ceiling is not raised when it is reached, which is expected this summer. The bill is a part of the Republican positioning ahead of an expected fight over raising the limit. Republicans plan to seek spending cuts at least equal to any debt limit increase. The best scenario is for policymakers to agree on a comprehensive debt plan well ahead of reaching the debt ceiling to avoid the costly brinksmanship of the last debt showdown.

Key Upcoming Dates (all times are ET)

April 26

  • Bureau of Economic Analysis releases advance estimate of 2013 1st quarter GDP.

May 3

  • Dept. of Labor's Bureau of Labor Statistics releases April 2013 employment data.

May 16

  • Dept. of Labor's Bureau of Labor Statistics releases April 2013 Consumer Price Index data.

May 19

  • 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.

May 30

  • Bureau of Economic Analysis releases second estimate of 2013 1st quarter GDP. 

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