‘Line’ Items: Dreams and Schemes Edition

Can Dreams of Cooperation be Fulfilled? – Yesterday the nation celebrated the legacy of Dr. Martin Luther King, Jr. His vision of unity and reconciliation will be needed as a divided Washington takes on many contentious issues, such as health care repeal and several budget-related issues. While some lawmakers are discussing crossing the aisle to sit together at the State of the Union address, much more substantive bipartisanship will be required as Congress navigates tough issues on the heels of the tragedy in Arizona that raised concerns about hyper-partisanship in our politics.

Back to Work, at Least on One Side of Capitol Hill – The House returns to session today after suspending activities last week in the wake of the shooting in Tucson that killed six people and left Congresswoman Gabrielle Giffords and fifteen others wounded.

House Leaders Return to Their Grand Scheme -- House leaders this week will resume their aggressive push to enact measures they promised during the last election, namely repealing health care reform and cutting federal spending. Today the House is expected to vote under suspension of the rules on legislation (H.R. 292) that will eliminate the mandatory printing of bills and resolutions by the Government Printing Office. It is a part of House GOP efforts to vote on a spending reduction bill every week. The savings from this week’s bill will be small; a similar proposal last year was estimated to save about $35 million over ten years. The House also will begin debate on repeal of health care reform today, with a vote set for tomorrow. CBO projects that repeal will add $230 billion to the deficit over the next ten years. A companion resolution will instruct relevant committees to report legislation to replace the measure. Also, the House Rules Committee will mark up a resolution tomorrow calling on House Budget Committee Chairman Paul Ryan (R-WI) to set spending levels for the rest of fiscal year 2011 “that assumes a transition to non-security spending at fiscal year 2008 levels.” The rules adopted by the House in early January give Ryan the ability to set allocation levels for the remainder of the fiscal year and the new leadership is intent on returning non-security spending to 2008 levels.

The Senate’s Longest Day – The flurry of activity in the House will not be mirrored by its counterpart on the other side of the Capitol. The Senate will not return to business until January 25, though technically it never adjourned after convening on January 5. This tactic will allow Senate leaders to continue considering new rules that may change how filibusters are conducted. Look for this to be the norm at least for the next two years: the Republican-controlled House will push out bills in line with the GOP agenda while the closely-divided Senate will struggle to produce much without a great deal of effort and bipartisan collaboration. For example, while health reform repeal is expected to pass in the House, it is given little chance of adoption in the Senate. See our ideas for reducing the costs of health care here.

Back to the Future for Spending Cuts? – In order to trim spending by $60 billion, House leaders are considering retroactively cutting some spending appropriated in the continuing resolution that is currently funding the government. Rescinding spending that already has been approved is one option being considered to enact significant spending cuts.

Tax Reform, the Impossible Dream? – News that President Obama might begin a push for fundamental tax reform with his January 25 State of the Union address has sparked a great deal of anticipation, but such a task will be easier said than done. A meeting on Friday between Treasury Secretary Tim Geithner and corporate executives appears to have affirmed general agreement on lower corporate rates in exchange for eliminating some tax breaks, but no concrete proposal emerged. Meanwhile, the House Ways and Means Committee will hold the first in a series of hearings addressing the issue on Thursday. The hearing will examine the burdens imposed by the current system and the need for reform. It is still not clear how hard the White House will push the issue and how much cooperation Congress will provide. See our ideas for reforming tax expenditures here.

Credit Agencies Losing Sleep Over U.S. Debt – Last week major credit rating agencies Moody’s and Standard & Poor’s warned that the U.S. was at risk of losing its gold-plated credit rating unless it addresses its debt. Moody’s cited in particular the failure to adopt the policies recommend by the President’s Fiscal Commission. A lower credit rating could result in higher interest rates, which would raise the price of U.S. debt and could hamper the economy.

Will China be a Nightmare for U.S.? – Chinese President Hu Jintao arrives in DC today for a four-day visit; look for what he says about U.S. debt. The last time President Hu met with President Obama he expressed concerns about growing U.S. debt, of which China is a major holder.

Is Jerry Brown California Dreaming on His Budget? – Newly installed California Governor Jerry Brown (D) has proposed a state budget designed to close a $25 billion deficit this year. The plan, evenly split between spending cuts and tax increases, has something for everyone to hate. Governor Brown says California is paying the price for budget gimmicks in the past that hid the true extent of the state’s fiscal woes. His ability to push through such a budget will be watched by other states and Washington.

How Will Conrad Ride Into the Sunset? – Senate Budget Committee Chairman Kent Conrad (D-ND) announced today that he will not seek reelection when his current term ends in 2012. He faced a potentially tough Republican challenge in a red state. The question now is will Conrad feel free to push for deficit and debt reduction policies from his powerful position that will be politically painful now that he is unencumbered by trying to retain his seat?

Balanced Budget Amendment More Than A Pipe Dream – Momentum appears to be building for an amendment to the Constitution requiring a balanced federal budget each year. Senators Orrin Hatch (R-UT) and John Cornyn (R-TX) say they will introduce balanced-budget amendment legislation when the Senate resumes legislative activity. Senator Rand Paul (R-KY) suggested pairing such an amendment with increasing the debt ceiling. Similar legislation had 88 cosponsors in the House in the last Congress and will likely garner more with the new Republican majority.

Key Upcoming Dates

January 18 – House of Representatives votes on eliminating mandatory printing of bills and resolutions as a part of federal spending reduction agenda.

January 18 – Treasury Department releases international capital flows data for November (which provides data on what countries hold U.S. debt).

January 19 – House of Representatives votes on repealing health care reform.

January 20 – House Ways and Means Committee convenes a hearing on fundamental tax reform.

January 20 – Labor Department releases data on weekly unemployment claims.

Week of January 24 – CBO is expected to release its Budget and Economic Outlook with updated budget baseline.

January 25 – President’s State of the Union address, where he is expected to focus prominently on fiscal responsibility and may preview his FY 2012 budget. 

January 25 – Senate resumes legislative activity.

January 25 – Federal Open Market Committee (FOMC) of the Federal Reserve convenes first Fed monetary policy meeting of 2011, with new voting members.

January 26 – FOMC meeting concludes and statement released.

January 28 – Commerce Department issues GDP estimate for 4th quarter of 2010.

Week of February 14 – The White House will unveil its FY 2012 budget.

March 4 – The current continuing resolution funding government operations expires. Congress must adopt spending bills funding the federal government for the rest of FY 2011 by then or pass another stopgap measure.

March 31 - May 16 – Period in which Treasury Secretary Geithner says the U.S. will likely reach the debt ceiling.

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