‘Line’ Items: Looking Abroad Edition A Weekly Update on Fiscal Policy Developments and a Look Ahead
To the Shores of Tripoli – With President Obama on vacation and Congress in recess, most eyes are turned away from Washington and towards developments overseas. The Middle East is being closely watched with a strongman in Libya on the verge of falling and another in Syria involved in bloody fighting to stay in power. But Europe also is worthy of attention with the debt crisis there compelling leaders to discuss major fiscal and economic policy changes. In the U.S., we are seeing the quiet before the storm, as the so-called super committee on deficit reduction takes shape and policymakers consider how to spark a flagging economy while also addressing the national debt. Finally, on Wednesday, the Congressional Budget Office (CBO) will release its latest update on the federal budget and economic outlook.
Europe Considers Fiscal Reforms – With Europe struggling to contain a debt crisis that threatens the economic union that the continent has worked so hard to build, leaders are considering major fiscal reforms to shore up the situation. The leaders of France and Germany are calling for all Eurozone governments to adopt constitutional balanced budget amendments to promote fiscal discipline. European leaders are also discussing closer fiscal integration among the European Union members as a result of the debt crisis.
The Other Paul Ryan Rumor – House Budget Committee Chairman Paul Ryan (R-WI) has been prominent in the news as of late due to persistent rumors that he is considering a run for president. The White House rumors have overshadowed news that Ryan plans to pursue major changes to the federal budget process. In a statement praising Speaker Boehner on his choices for the Super Committee, Ryan also stated that he asked Boehner not to be selected for the group so that he can pursue budget process reform in his Budget Committee. He said he plans hearings and mark ups this fall in parallel with the Super Committee’s work. The dysfunctional budget process is definitely in need of reform. The Peterson-Pew Commission on Budget Reform produced a detailed framework that fixes the budget process in a manner that will promote making and carrying out the fiscal policy decisions necessary to put the country on the right path.
Obama Working on Plan – President Obama has announced that he will unveil a plan to boost the struggling economy that also reduces the deficit shortly after Labor Day. The plan will include extending the payroll tax holiday for another year. Meanwhile, prominent commentator E.J. Dionne writes in his latest column that Obama must “go big, go long and go global.” Dionne recommends investments in infrastructure and aid to state and local governments now while also saying that, “[a]t the same time, Obama should put forward a plan of his own to close the long-term deficit.” We definitely must go big and long with a fiscal plan that reduces the deficit substantially and promotes long-term growth.
Administration Looks for Spending Cuts – Last week the Office and Management and Budget (OMB) sent to all department and agency heads a memo requesting that their FY 2013 budget submissions be at least 5 percent lower than their FY 2011 spending levels and to identify further cuts that could reduce the level to 10 percent below FY 2011 funding. The memo states that the effort is “to support the President's commitment to cut waste and reorder priorities to achieve deficit reduction while investing in those areas critical to job creation and economic growth.” As CRFB pointed out in a blog, it will also help the administration comply with the new spending caps under the Budget Control Act.
Key Upcoming Dates
- Congressional Budget Office (CBO) releases its update on the budget and economic outlook.
- Second quarter GDP revision from the Commerce Department.
- Senate back in session.
- House of Representatives back in session.
- Debate at the Ronald Reagan Presidential Library in California for 2012 Republican presidential candidates.
- GOP presidential debate in Florida.
- The Joint Select Committee on Deficit Reduction (Super Committee) must hold its first meeting by this date.
- Second GOP presidential debate in Florida.
- New fiscal year begins. Legislation fully funding the federal government, or a stopgap measure with temporary financing of government operations, must be enacted by then.
- GOP presidential debate in New Hampshire.
- Congressional committees must submit any recommendations to the Super Committee by this time.
- GOP presidential debate in Nevada.
- The Super Committee is required to vote on a report and legislative language recommending deficit reduction policies by this date.
- The Super Committee report and legislative language must be transmitted to the president and congressional leaders by this date.
- Any congressional committee that gets a referral of the Super Committee bill must report the bill out with any recommendation, but no amendments, by this date.
- Congress must vote on the bill recommended by the Super Committee by this date. No amendments are allowed.