Line Items: Fall Classic Edition A Weekly Update on Budget and Fiscal Policy Developments and a Look Ahead
Play Ball, Please – Baseball’s World Series is under way and it is a classic contest between evenly matched teams that could go either way. Meanwhile, Washington is experiencing its own Fall Classic that could go either way. The Joint Select Committee on Deficit Reduction (aka the Super Committee) is engaged in its own contest of wills that is generating a lot of “will” questions: Will the panel come up with a deal? Will the deal be for $1.2 trillion, or more, or less? As is usually the case in these big-time contests, the outcome will hinge on who steps up to the plate and delivers. Who will be the Mr. (or Ms.) October of the debt debate?
Super Committee in Seventh Inning Stretch – The deficit reduction All-Star team is getting into the late innings. They face a formal deadline of November 23rd to vote out recommendations for Congress to consider. However, the effective deadline could be even sooner in order to give the Congressional Budget Office (CBO) time to score the proposal, though the Committee is already giving possible options to CBO to score in order to speed up the process. Meanwhile, congressional leaders are getting more involved and are preparing members for a vote on whatever the Super Committee proposes. Committee members are also discussing a possible two-step process where the panel agrees on entitlement savings and closing tax loopholes and instructs the tax-writing committees to perform a fundamental overhaul of the tax code that achieves additional deficit reduction. The team takes the field for its next public hearing on Wednesday to discuss discretionary spending with CBO Director Doug Elmendorf. Meanwhile it continues regular private meetings in the clubhouse.
Going Big is More Practical – While it may sound like the equivalent of swinging for the bleachers when all that is needed is a base hit, a new brief released Friday by CRFB makes the case that going deep would be more helpful for the Super Committee than trying to hit a grounder. Going big with everything on the table presents more avenues for making the tradeoffs necessary to reach a deal, while a more narrow approach closes off many possibilities. CRFB also created a PowerPoint presentation to help make the case. See our Go Big page for more on the topic and watch the videos we produced with a diverse group of thought leaders explaining why going big is important and how to do it.
Tax Reform Celebrates 25th Anniversary – The Tax Reform Act of 1986 is a clear Hall of Famer when it comes to legislative accomplishments. The bipartisan reform simplified the tax code by eliminating many tax loopholes and also lowered rates. Harvard economist Martin Feldstein writes that the tax reform resulted in an increase in taxable income. On the occasion of the 25th anniversary of the reform act’s enactment, many are asking if that feat can be accomplished again. CRFB’s Paul Weinstein and Ed Lorenzen write in The Atlantic that while tax reform can be complicated, the Super Committee would not be working from scratch. They point to the Zero Plan from the Bowles-Simpson Fiscal Commission that simplifies the tax code, lowers rates, and eliminates costly tax expenditures to reduce the deficit (see here and here for more ideas). They also note that the Super Committee doesn’t have to do fundamental reform all at once; they can initiate a process for expedited consideration of tax reform that sets certain criteria and parameters.
Small Ball in Senate – The Senate is in recess this week while the House returns from its break. When they return, Senators will finish up amendments and vote on final passage on a “minibus” spending bill combining the FY 2012 Agriculture, Commerce-Justice-Science, and Transportation-Housing and Urban Development appropriations measures. The package totals $182 billion. Already way behind in moving the 12 annual spending bills, instead of rolling them up into one omnibus bill legislators decided to move a few smaller minibus packages. Yet, that approach is still moving slowly as a wave of amendments held up final passage in the Senate last week. With a November 18th deadline fast approaching, yet another continuing resolution is likely to prevent a government shutdown. The mini approach in the Senate has also failed to ease enactment of President Obama’s jobs agenda. After the full White House proposal failed earlier this month, Senate leaders choose to break it up to see if individual elements would be more palatable. However, a bill that would send $35 billion to state and local governments to pay for teachers and first responders failed to break a filibuster on a 50-50 vote.
Comparing Triggers – Managers often have pitch counts for their pitchers, especially when they have just returned from injury. Once a hurler reaches the set amount of pitches, a change on the mound is triggered. A similar concept has been proposed to help the ailing federal budget improve its performance. President Obama included a mechanism in his economic growth and deficit reduction plan setting targets for cutting the national debt and triggers to ensure those targets are met. A new brief compares it to the trigger proposed by the Peterson-Pew Commission on Budget Reform in Getting Back in the Black. See our one-stop resource on budget reform for more.
CPI Changes – Not to be confused with the RBI, the Consumer Price Index (CPI) is a measure of inflation that has a significant impact on the federal budget. Last week the IRS announced that it was increasing the value of tax breaks and the threshold for tax rates based on CPI changes. The Social Security Administration also announced there would be a cost-of-living-adjustment (COLA) of 3.6 percent for Social Security beneficiaries. According to reports, the Super Committee is considering changing to an alternative measure of CPI that is believed to be a more accurate measure of inflation, which would likely reduce changes to tax expenditures and Social Security benefits, thus reducing the deficit. Read more on chained CPI and its potential to reduce the deficit here.
Key Upcoming Dates (all times ET)
- Military Personnel Subcommittee of the House Armed Services Committee hearing on "Military Retirement Reform" at 1 pm.
- Health Subcommittee of the House Energy and Commerce Committee hearing on suspending implementation of the CLASS Act at 9 am.
- Joint Select Committee on Deficit Reduction (Super Committee) hearing on discretionary spending at 10 am.
- House Armed Services Committee hearing on the "Economic Consequences of Defense Sequestration" at 10 am.
- Readiness Subcommittee of the House Armed Services Committee hearing on "Readiness in the Age of Austerity" at 10 am.
- Continuing resolution (CR) currently funding federal government operations expires.
- 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.