Line Items: Primary Edition A Weekly Update on Budget and Fiscal Policy Developments and a Look Ahead
Deficit Secondary in Primary – The presidential primary campaign hits a key point this week as "Super Tuesday" contests in several states may go a long ways in determining who will face off against President Obama in November. Although voters constantly rank the economy and federal budget deficit as the top two issues, they seem to have taken a back seat to social issues in the campaign right now. However, CRFB’s U.S. Budget Watch project seeks to elevate fiscal policy in the election. It started with "The 12 Principles of Fiscal Policy for the 2012 Campaign" and recently featured the release of "Primary Numbers: The GOP Candidates and the National Debt" – which examined how the candidates' policy positions would affect the budget.
"Fiscal Cliff" Hanger Ending to the Year – Whether candidates want to discuss fiscal policy or not on the campaign trail, events seem destined to put the issue to the fore just after the election. The statutory debt ceiling will likely be reached soon after the election, the 2001/2003/2010 tax cuts will expire at the end of the calendar year, and the sequester cutting over $1 trillion in spending triggered by the failure of the Super Committee is scheduled to kick in at the beginning of next year. Federal Reserve Chair Ben Bernanke described the confluence of the tax cuts expiring and the sequester beginning as a "massive fiscal cliff" in congressional testimony last week. Bernanke said he hopes lawmakers will find a way to achieve long-term deficit reduction without such a shock to the system. CRFB has also called for a "Go Big" and a "Go Smart" approach.
Sticking a Thumb in the IPAB – It may sound like the latest tech gadget, but IPAB (short for Independent Payment Advisory Board) is actually a mechanism in the Affordable Care Act to control Medicare spending, which is projected to grow substantially if left unchecked. While IPAB’s operations will not begin until 2014 and it will have a rather limited mandate, it has become a target for some lawmakers. A subcommittee of the House Energy and Commerce Committee approved of legislation last week to repeal the body and the full committee will mark up the bill starting Monday. The House Ways and Means Committee will conduct a hearing on IPAB Tuesday. Lawmakers complain that the body will infringe on their authority because it will be able to make cost-cutting recommendations that will automatically go into effect unless Congress acts, but legislators can override the recommendations. One may be inclined to suggest that a compromise would be to have the panel simply make recommendations to Congress to act on. Well, that is exactly the system we have in place now. The Medicare Payment Advisory Commission (MedPAC) routinely makes recommendations to Congress that are consistently ignored. Indeed, we pointed out that Congress has been much more active in opposing IPAB than it has been in seeking solutions to bend down the health care cost curve. IPAB represents one of the few serious attempts to control Medicare spending, which is essential as federal health care spending will be the main driver of the national debt moving forward.
GAO Highlights Government Duplication; GAO Highlights Government Duplication – Last week the Government Accountability Office (GAO) issued its second annual report to Congress identifying duplicative efforts within the federal government, along with recommendations for savings. A few examples of recommendations include better information-sharing among various agencies involved with health research and consolidation of Pentagon unmanned aircraft acquisition programs.
Tax Reform Storm Brewing – Limiting tax expenditures received lots of attention at a Thursday Senate hearing on tax reform that promotes growth, fairness and deficit reduction. Sen. Pat Toomey (R-PA) mentioned the proposal to cap individual tax expenditures put forth by Martin Feldstein, Daniel Feenberg, and CRFB’s Maya MacGuineas. The Simpson-Bowles tax reform proposal that involves eliminating most tax expenditures was also held up as a good model to follow. Meanwhile, Treasury Secretary Tim Geithner last week met with leaders of the tax-writing congressional committees on the subject of tax reform.
EU Agrees on Fiscal Pact...Now Comes Hard Part – On Friday, 25 European Union leaders signed a new fiscal pact that will give the EU more power to enforce budget discipline among member countries. Among other things, the compact sets deficit targets for countries to follow and provides punishments for non-compliance. National legislatures must still ratify the agreement, but doubts already are surfacing regarding the arrangement that is intended to prevent further crises like the debt crisis that has been dogging the continent. Countries such as Spain and Hungary are projected to fail to meet their deficit targets, which will test the enforcement mechanisms of the treaty and the will of EU leaders to carry it out. See our budget reform resources for more on ideas like fiscal rules and targets.
Mobilizing a Sound Strategy to Confront the Debt – In congressional testimony last week, Defense Secretary Leon Panetta testified that a smart approach can reduce the deficit significantly without hurting national defense. He said everything had to be on the table, including discretionary spending, mandatory spending and revenues. He also said that "the leaders of both the legislative and executive branches of government have a duty to protect both our national and fiscal security." Panetta speaks from a unique perspective as not only the Pentagon chief, but also as a former OMB director (and former CRFB co-chair).
Key Upcoming Dates (all times ET)
- Wyoming Caucus
- Super Tuesday - presidential contests in Alaska, Georgia, Idaho, Massachusetts, North Dakota, Ohio, Oklahoma, Tennessee, Vermont and Virginia.
- House Appropriations hearing on the FY 2013 budget request for the US Agency for International Development at 9 am.
- House Appropriations hearing on the FY 2013 budget request for the Bureau of Land Management at 9:30 am.
- House Energy & Commerce Committee continues markup of legislation to repeal the Independent Payment Advisory Board (IPAB) at 10 am.
- House Ways and Means Committee hearing on the Independent Payment Advisory Board (IPAB) at 10 am.
- Senate Budget Committee hearing on perspectives on the FY 2013 Defense budget request at 10 am.
- Senate Finance Committee hearing on "Tax Reform Options: Incentives for Capital Investment and Manufacturing" at 10 am.
- Senate Energy & Natural Resources Committee hearing on the FY 2013 budget request for the Forest Service at 10 am.
- House Appropriations hearing on the FY 2013 budget request for the Air Force at 10 am.
- House Appropriations hearing on the FY 2013 budget request for the Securities and Exchange Commission at 10 am.
- House Appropriations hearing on the FY 2013 budget request for the National Science Foundation at 10 am.
- House Appropriations hearing on the FY 2013 budget request for the Dept. of Health and Human Services with HHS Secretary Kathleen Sebelius at 2:30 pm.
- Senate Foreign Relations Committee hearing on international development priorities in the FY 2013 budget at 2:30 pm.
- House Appropriations hearing on the FY 2013 budget request for the FBI at 9 am.
- Senate Appropriations hearing on the FY 2013 budget request for the Dept. of Health and Human Services with HHS Secretary Kathleen Sebelius at 10 am.
- House Appropriations hearing on the FY 2013 budget request for the US Army at 10 am.
- House Appropriations hearing on the FY 2013 budget request for the Federal Emergency Management Agency at 10 am.
- Senate Appropriations hearing on the FY 2013 budget request for the Dept. of Navy at 10:30 am.
- House Appropriations hearing on the FY 2013 budget request for the US Army Corps of Engineers at 2 pm.
- Senate Commerce, Science & Transportation Committee hearing on the FY 2013 budget request for the Coast Guard and the National Oceanic and Atmospheric Administration at 2:30 pm.
- House Appropriations hearing on the FY 2013 budget request for the Dept. of Transportation with Transportation Secretary Ray LaHood at 9:30 am.
- House Appropriations hearing on the FY 2013 budget request for the National Park Service at 9:30 am.
- House Appropriations hearing on the FY 2013 budget request for the Defense Health Program at 10 am.
- Senate Appropriations hearing on the FY 2013 budget request for the Dept. of Justice with Attorney General Eric Holder at 10 am.
- Senate Appropriations hearing on the FY 2013 budget request for the Dept. of Homeland Security with Homeland Security Secretary Janet Napolitano at 10 am.
- House Appropriations hearing on the FY 2013 budget request for Immigration and Customs Enforcement at 1 pm.
- Senate Indian Affairs Committee hearing on the FY 2013 budget request for native programs at 2:15 pm.
- Dept. of Labor's Bureau of Labor Statistics releases February 2012 employment data.
- Presidential contests in Kansas and the Virgin Islands
- Presidential contests in Alabama, Mississippi, and Hawaii
- Dept. of Labor's Bureau of Labor Statistics releases February 2012 Consumer Price Index (CPI) data.
- Missouri Caucus
- Puerto Rico Primary
- Oregon GOP Debate sponsored by PBS at 9 pm.
- Illinois Primary
- House Appropriations hearing on the budget, Military Construction, Veterans Affairs and Related Agencies, with Eric Shinseki, Secretary of Veterans Affairs.
- Louisiana Primary
- US Dept. of Commerce's Bureau of Economic Analysis releases its third and final estimate of 2011 fourth quarter GDP.
- Presidential contests in DC, Maryland, Wisconsin, and Texas
- Dept. of Labor's Bureau of Labor Statistics releases March 2012 employment data.
- Dept. of Labor's Bureau of Labor Statistics releases March 2012 Consumer Price Index (CPI) data.
- Tax Day! Federal income tax returns are due.