Line Items: Back to Work Edition Weekly Update on Budget and Fiscal Policy Developments and a Look Ahead
Syria-ous Business – The kids are back in school. People across the country are back from vacation and returning to the daily grind, including Congress, which is back this week after the long August recess. The main topic of conversation in Washington this week is Syria, as policymakers deliberate on how to deal with its use of chemical weapons. But attention should also be given to key fiscal disputes, namely funding the federal government and raising the statutory debt ceiling. House and Senate leaders will meet on Thursday to discuss how to move forward on the fiscal issues, which represent two critical fiscal speed bumps ahead.
Approps of Nothing – Given the recent track record of Congress, it’s no surprise that the annual appropriations process has stalled yet again. Congress is not expected to produce any of the twelve spending bills to fund the federal government before the new fiscal year begins on October 1, meaning that a stopgap continuing resolution (CR) will be required to prevent a government shutdown. The House is planning to vote on a CR this week that would continue funding the government at current spending levels through mid-December. However, some House members are contemplating tying the vote on the CR to a vote on defunding the president’s health care reform law.
Will Policymakers Make the Grade? – We put out a new paper on Tuesday that lays out what we would like to see from the government funding negotiations that includes a grading scale. Policymakers get an “A’ if they replace sequestration with a comprehensive fiscal plan and a "F" if they appropriate about sequester levels without finding offsets or using gimmicks. See the full paper and grading scale here.
How Will this Debt Ceiling Debate Work Out? – On the heels of the fiscal year deadline to avoid a government shutdown, policymakers must also navigate an impending breach of the statutory debt limit, which will cause a national default if the limit is not raised. Treasury Secretary Jacob Lew says the “extraordinary measures” now being undertaken to prevent a debt limit breach will be exhausted in mid-October. The Bipartisan Policy Center puts the “X Date” in a range between October 18 and November 5. Track debt ceiling developments here and learn more about the debt limit here. Meanwhile, the Organization for Economic Co-Operation and Development (OECD) warned the U.S. that another debt ceiling stand-off like two years ago would imperil the economy not only in this country, but globally. They also urged adoption of a "credible medium-term" fiscal plan.
Still Laboring on Tax Reform – Senate Finance Committee chair Max Baucus (D-MT) and House Ways and Means Committee chair Dave Camp (R-MI) took their tax reform tour to Tennessee on Monday, meeting with farmers and local business leaders in Memphis. The bipartisan duo was greeted by an op-ed from another bipartisan pair, former Governors Phil Bredesen and Winfield Dunn, encouraging their efforts. Baucus and Camp say that consensus is forming in Washington on corporate tax reform. President Obama broached the subject over the summer by proposing reform that gets rid of corporate tax breaks while lowering tax rates and putting the proceeds towards projects designed to increase jobs. Try your hand at reforming the corporate tax code with our simulator. As a sign of his commitment to fundamental tax reform Camp has told his committee that they will dedicate the month of September to the topic, working towards Camp’s goal of an October mark-up of tax reform legislation. With the increased scrutiny of the various loopholes and preferences in the tax code that are ripe for reform, CRFB launched a “Tax Break-Down” blog series that will examine these tax expenditures one at a time.
Key Upcoming Dates (all times are ET)
- Treasury Department monthly federal budget statement.
- Weekly jobless claims report from the Department of Labor.
- Consumer Sentiment Index from the University of Michigan.
- Congressional Budget Office (CBO) releases Long-Term Budget Outlook.
- Federal Open Market Committee (FOMC) of the Federal Reserve meets.
- Fiscal Year 2014 begins. A continuing resolution must be approved by this date in order to prevent a government shutdown.
- 100th Anniversary of the Revenue Act of 1913, which instituted the federal income tax.
October 18 - November 5
- Time range in which the Bipartisan Policy Center estimates the statutory debt ceiling will be breached. A national default will occur unless the debt limit is raised before that point.