Committee for a Responsible Federal Budget

Between the ‘Line’s: Feeling the Heat, Coming Clean, and Disaster Dilemma

Jun 1, 2011 | Taxes

Feeling the Heat – As most of us return to work this week nursing sunburns and swapping stories of grilling glory, the heat is on in Washington, at least on one side of Capitol Hill. Senators are out of town this week, but Representatives are working on appropriations. Meanwhile, the debt limit deadline continues to draw closer.

Coming Clean Doesn’t Work – The House of Representatives late Tuesday soundly voted down a “clean” $2.4 trillion increase in the statutory debt limit on a 97-318 vote. The vote was a symbolic one to show that there is not enough support for an increase that does not include debt reduction measures. See the CRFB paper on how to responsibly couple a debt ceiling increase with policies to decrease the deficit.

Senate Votes for Budget Gridlock – Symbolic votes are quite the trend. The Senate held four last week regarding the FY 2012 budget, voting down the House-passed budget (40-57) and the original budget proposed by the White House in February (0-97). Proposals from Sen. Rand Paul (7-90) and Sen. Pat Toomey (42-55) also failed. The votes were more about political theater than results. The Senate is resigned to holding off on a budget resolution until a bipartisan deal is reached.

House Moves on Appropriations – Once again the House and Senate are going on divergent paths regarding the federal budget. While the Senate is stalled over a budget resolution, the House is moving through the appropriations process with floor votes this week on the Homeland Security and Military Construction/Veterans Affairs spending bills. Those bills are expected to be considered under open rules, allowing for numerous amendments where members will seek to lower spending even more. The Appropriations Committee also marked-up the Agriculture spending bill on Tuesday and subcommittees will mark up bills including the Defense spending measure this week. The House is working off of the top line spending amount approved in the House budget resolution, $1.019 trillion, which will be officially “deemed” as a part of the rule on the Homeland Security bill. The Senate has not agreed to that figure, meaning that yet another budget train wreck may await, underscoring the need for budget process reform. The Peterson-Pew Commission on Budget Reform offered a blueprint for reforming the budget process in the report, Getting Back in the Black.

Disaster Spending Dilemma – In a real sign that the fiscal times are changing, Congress is having a serious debate about how it budgets for disasters. The Homeland Security appropriations bill the House will vote on this week includes an extra $1 billion in emergency spending for the Federal Emergency Management Agency (FEMA) to assist with recovery and rebuilding efforts in the aftermath of recent tornados and flooding. However, in a break with previous practice, the funding is offset with cuts elsewhere, namely to the Energy Department’s Advanced Technology Vehicle Manufacturing Loan program, which provides support for producing alternative energy vehicles. In the past, funds designated for disaster relief have not been offset and pay-as-you-go rules have an exemption for emergency spending. Lawmakers in the past have not budgeted in advance for disasters, arguing that they can’t be predicted. However, as the Peterson-Pew Commission on Budget Reform pointed out (p. 28), we know for certain that disasters in some form will occur each year. Failing to budget for the inevitable and then not offsetting the cost of emergency spending distorts the budget.

Issues, Schedule Hamper Biden Talks – The deficit group led by Vice President Biden has fairly clear goals – finding $1 trillion in specific spending cuts and devising some sort of trigger mechanism that will produce another $3 trillion in deficit reduction. These goals are not unrealistic – CRFB has identified over $1 trillion in common-ground deficit savings based on recent fiscal plans from both parties and we recently offered recommendations on making a debt trigger work. However, ideological differences threaten to encumber progress. Republicans demand that Medicare cuts be a part of the deal while Democrats want revenues in the mix. CRFB has some ideas for Medicare reform that could get bipartisan backing, while eliminating or reducing tax expenditures could also achieve support on both sides of the aisle (see here and here for tax expenditure reform ideas). The congressional schedule may be the biggest obstacle to timely action before the August 2 default deadline set by the Treasury Department. The group is not meeting this week because the Senate is out of town and with the House out next week, it is not clear when the principals will meet again.

Meetings Galore – Even though the Biden talks aren’t convening this week, there are still many high-level meetings going on. President Obama meets with House Republicans Wednesday and House Democrats Thursday to discuss budget matters. And Treasury Secretary Geithner meets with House freshmen Thursday to discuss fiscal issues.