Line Items: Back-Up Edition Weekly Update on Budget and Fiscal Policy Developments and a Look Ahead
Monday Morning Quarterbacking – The Washington Redskins stayed in playoff contention Sunday with back-up quarterback Kirk Cousins leading the team to victory. As DC basks in the glow of being in the division lead, there is also concern that it is behind in averting the fiscal cliff. With the end-of-year deadline just two weeks away, more of the discussion is turning to what the back-up plan is. While there is plenty of armchair quarterbacking going on, no one has yet taken command of the situation to lead the way to a solution. There is also a pall over everything as the nation comes to grips with the tragedy in Newtown, CT. Our thoughts go out to all those impacted.
Fiscal Cliff Could Hold Back Economy – The New York Times reports that there are signs the economy could strengthen in 2013, if the fiscal cliff is averted. The Wall Street Journal also identifies the fiscal cliff as the wild card that could disrupt the recovery. Meanwhile, Americans are speaking up and demanding that policymakers act. A new ad from the Campaign to Fix the Debt highlights support from Americans from various walks of life among the more than 320,000 signers of the Citizen’s Petition to Fix the Debt. New York Mayor Michael Bloomberg joined the campaign last week as many other leaders signaled support for the cause. Over 2,500 small business leaders are now a part of the effort along with community leaders in several states. There are now several tools for devising your own fiscal cliff plan, including our “Stabilize the Debt” budget simulator.
Both Sides Back Off a Little – There was some movement in the fiscal cliff talks over the weekend between President Obama and House Speaker Boehner. The two met again Monday morning, showing that there may be increased momentum towards getting a deal. Obama has lowered his revenue target from $1.6 trillion to $1.4 trillion. Boehner offered to allow tax cuts to expire for those making over $1 million a year in exchange for entitlement savings. More revenue would be attained through tax reform that simplifies the tax code and broadens the base by limiting or eliminating tax expenditures. Read more on base-broadening tax reform and tax expenditures here. Raising the Medicare retirement age and switching to an alternative version of the Consumer Price Index (CPI) for adjusting federal programs for inflation are discussed as possible changes on the spending side. Read more on the "chained CPI" here (and here). Our latest brief examines what we would like to see come from the fiscal cliff negotiations. Also, keep track of the issue with our Fiscal Cliff Resource Page.
Pushing Back the Debt Limit Fight? – Boehner also reportedly offered to extend the statutory debt ceiling for another year if spending cuts at least equal to the amount of the increase were included in the fiscal cliff deal. Pairing the debt limit increase with a fiscal cliff deal would avert another potential ugly fiscal fight in the first few months of the new year, when the limit will be reached and all "extraordinary measures" to delay a default will be exhausted. Keep abreast of debt ceiling developments here.
Budget Taking a Back Seat – The Office of Management and Budget (OMB) is delaying the process for crafting the president’s Fiscal Year 2014 budget request because of uncertainty regarding the fiscal cliff. The budget is usually submitted on the first Monday in February, but may slip into March because the negotiations over the fiscal cliff are making it difficult for federal agencies to plan their funding requests. Of course, Congress has still yet to complete the current-year budget. The government is currently operating on a stop-gap “continuing resolution” funding federal agencies through late March. Since they managed to pass none of the 12 individual spending bills, lawmakers plan to combine all of them into one “omnibus” appropriations bill. While appropriators have made progress in agreeing on many components of the spending package, the fiscal cliff drama is delaying this process as well. For ideas on reforming the dysfunctional budget process, visit here.
Aid Package to be Brought Up – A $60.4 billion aid package to assist in recovery and rebuilding efforts from Hurricane Sandy is to be considered by the Senate this week. President Obama has asked that the spending not be offset by cuts or revenue elsewhere. The supplemental measure may find more opposition in the House.
Key Upcoming Dates (all times are ET)
- House Education and the Workforce hearing on pension plans at 10 am.
- Third estimate of third quarter GDP figures released
January 1, 2013
- The "fiscal cliff" occurs, including the expiration of the 2001/2003/2010 tax cuts and across the board spending cuts the following day
- 113th Congress will convene
- Unemployment statistics for the month of December released
- Consumer Price Index data for December released
- President Obama publicly sworn in for his second term (a private swearing in will occur on Sunday the 20th, the technical inauguration date)
- Advance estimate of fourth quarter GDP figures released