‘Line’ Items: Bowl Edition A Weekly Update on Budget and Fiscal Policy Developments and a Look Ahead
Bowled Over – The all-knowing BCS computers have chosen LSU and Alabama to contend for the college football championship. Both teams are familiar foes and perennial contenders. The same can be said of the budget battles that will cap the year. Yearly appropriations, the doc fix, and the AMT patch continue their dominance at the top of the political agenda, along with the payroll tax holiday, which has emerged as a powerhouse in recent years. The myriad of other bowl games have also been set, offering a cornucopia of opportunities sponsored by various food products for other teams to take the stage. Likewise, tax extenders and expanded unemployment benefits will also have their moments. Will we ever see a shake-up in the standings? Will the top dogs ever be toppled or will we continue to see them year-after-year? There’s no Boise State or TCU this year.
No Escape from Payroll Tax Holiday – While there is growing agreement that the payroll tax holiday will be extended for another year, there remains a great deal of debate over if/how it will be paid for. The Senate blocked Democratic and Republican proposals last week to extend and pay for the tax cut holiday. On Monday, Senate Majority Leader Harry Reid (D-NV) unveiled a new version of legislation that would extend the payroll tax cut for one year and increase it, reducing the employee portion of the tax from the current 4.2 percent of wages to 3.1 percent. It does not include provisions recommended by President Obama to apply the tax cut to some employers. The temporary tax cut would be paid for by leveling a surcharge of just under 2 percent on incomes above $1 million that would expire after ten years. Other offsets in the package include a means test to prohibit millionaires from collecting federal benefits such as Social Security and unemployment insurance and reductions in non-health care mandatory spending that had been previously considered. The payroll tax cut in the bill is estimated to cost $180 billion over ten years. The new Senate version does not include a doc fix or an extension of expanded unemployment benefits, though they are still expected to move separately. The House is expected to move its own version this week.
Appropriators Seeing with Rose Colored Glasses – Appropriators are very optimistic that they can wrap up work on the nine remaining FY 2012 spending bills before Christmas. Appropriators say they are close to agreement on most of the package of approximately $900 billion in spending, with the Labor-HHS-Education portion and potential policy riders the last big sticking points.
Physicians Want Some Sugar – Doctors will get the patch of the Medicare Sustained Growth Rate (SGR), otherwise known as the doc fix, which will prevent a 30 percent cut in reimbursement rates to physicians who tend to patients on Medicare. The question is, will the fix be for one year or two. The betting money is on one year, which will cost about $22 billion.
Orange You Glad We Didn’t Say “Super Committee” – In a rare moment of bipartisanship that was lacking in the Super Committee, House Budget Committee Chairman Paul Ryan (R-WI) and Ranking Member Chris Van Hollen (D-MD) last week introduced legislation that would give enhanced rescission power to the President. The bill is designed to effectively provide a line-item veto to the White House that can pass Constitutional muster. It would allow the President to identify specific items in appropriations bills to be removed and Congress would have to quickly vote on those rescissions without changes. The bill is very similar to bipartisan legislation in the Senate.
No Fiesta in Europe – European leaders continue to grapple with the debt crisis that threatens to engulf the continent, and the rest of the world, in a financial debacle. As a part of the effort, leaders are considering tighter fiscal rules for members of the European Union to help guard against such a crisis from occurring again. French President Nicholas Sarkozy and German Chancellor Angela Merkel called on EU members to agree to a new treaty that will increase oversight of member countries’ budgets and penalties for violating spending rules. Meanwhile, S&P placed those two countries and 13 others in the eurozone on a negative credit watch Monday, warning of possible downgrades. The European example underscores the painful choices that are required when budget problems are ignored.
Cotton Swabs Instead of Bandages – Senators Claire McCaskill (D-MO) and Pat Toomey (R-PA) last week introduced legislation that would make the temporary ban on earmarks permanent. While earmarks represent a small part of the budget, getting rid of them is a step in the right direction for fiscal responsibility. But much more needs to be done.
Taking Liberty with BBA – The Senate is required by the Budget Control Act to vote on a balanced budget amendment by the end of the year, but the chamber will go further and vote on two different versions of a Constitutional amendment. One version is sponsored by Sen. Mark Udall (D-CO) and would exempt Social security from balanced budget requirements and prohibit tax cuts for the wealthy when the budget isn’t in surplus. The other version is supported by all Republicans in the Senate; it would cap federal spending at 18 percent of GDP and require a 2/3 majority vote to raise taxes. Neither version is expected to get the 2/3 majority needed to pass. The House already rejected its BBA.
Key Upcoming Dates (all times ET)
- GOP presidential debate in Des Moines, IA sponsored by ABC News at 9 pm.
- GOP presidential debate in Sioux City, IA sponsored by Fox News at 9 pm.
- Continuing resolution (CR) currently funding federal government operations expires.
- GOP presidential debate in Johnston, IA sponsored by PBS NewsHour, Google and YouTube at 4 pm.
- Both houses of Congress must vote on a balanced budget amendment to the U.S. Constitution, as required by the Budget Control Act.
January 3, 2012
- Iowa Caucuses.
January 10, 2012
- New Hampshire Primary.
January 21, 2012
- South Carolina Primary.
January 31, 2012
- Florida Primary.