Line Items: Year of the Snake Edition Weekly Update on Budget and Fiscal Policy Developments and a Look Ahead
Happy New Year – The Chinese New Year was ushered in over the weekend and 2013 is the year of the Snake. According to at least one horoscope, “This 2013 year of Snake is meant for steady progress and attention to detail. Focus and discipline will be necessary for you to achieve what you set out to create." Those born in the year of the Snake are said to approach problems rationally and logically and to be financially secure. Those are definitely attributes we would like to see more of this year as they have been largely absent from Washington so far.
CBO Finds that Debt is a Slippery Issue – The nonpartisan Congressional Budget Office (CBO) last week released its 2013 Budget and Economic Outlook. The report illustrates the need for a smart, long-term approach for addressing the deficit, as well as how the national debt and economy are intertwined. CBO predicts that abrupt deficit reduction like the sequester would impair economic growth in the short term while failing to address the long-term growth of the debt will impair the economy significantly down the road. A companion report also shows that $2.3 trillion of additional deficit reduction over the next decade would result in higher economic growth than currently projected in the longer term. CRFB has a summary and analysis of the report. Under current law, CBO predicts that debt will reach 77 percent of the economy by 2013. Under its Alternative Fiscal Scenario, assuming that the sequester is waived, various tax breaks are extended and the "doc fix" continues, the debt will reach 87 percent of GDP by 2023. CRFB estimates using its own realistic baseline that debt will reach 79 percent of the economy by 2023.
No Venom in State of the Union? – President Obama will give the annual State of the Union address tonight at 9 pm EST. The New York Times reports that the President will offer an optimistic vision and focus on improving the economic prospects for the middle class in his remarks. According to sources cited in the article, any new initiatives mentioned in the speech will be fully offset by new savings or revenues elsewhere in the budget and that Obama will revive his call for a comprehensive "big deal" to reduce the deficit. Our updated brief illustrates that much more work is still required when it comes to the national debt. We calculate that a minimum of $2.4 trillion in additional savings will be required to put the debt on a downward path over the next decade and beyond.
Will Congress Turn Cold-Blooded on the Sequester? – Word is that President Obama will also continue to urge lawmakers to avoid the across-the-board spending cuts of sequestration ahead of the March 1 deadline in his State of the Union Address. He began last week by urging a short-term plan with revenue and spending cuts to delay the sequester and followed it up by releasing a fact sheet detailing how the cuts of the sequesters would impact Americans. The pressure will continue this week with hearings highlighting the effects of sequestration and legislation from Senate Democrats by Thursday to replace this year’s sequester cuts with other spending cuts and tax increases. Congressional Republicans are loathe to include any new revenue in any sequester deal, which has many fearing that the sequester will go into effect.
Rolling Snake Eyes on 2013 Appropriations? – Sequestration is not the only March deadline facing policymakers. The continuing resolution currently funding the federal government expires on March 27. Without a spending plan for the rest of the fiscal year or another short-term stopgap measure, the government will shut down. Appropriators are said to be preparing another stopgap measure, meaning that a more comprehensive spending bill is not likely. Their work will also be affected by the sequester debate, since the sequester is scheduled to cut discretionary spending by $70 billion.
Slithering Around Fiscal Speed Bumps – The sequester and continuing resolution are just a couple of deadlines among a handful of "fiscal speed bumps" ahead; check out our infographic that lays them all out. Washington hasn’t had such a good track record of dealing with fiscal deadlines so far, only partially dealing with the fiscal cliff and kicking the can on the debt ceiling. The only way to avoid more fiscal drama is to develop a long-term, comprehensive fiscal plan.
Solution Coming for Doc Fix Snake Oil? – One of the few pieces of good news in last week’s CBO report was that the cost of a permanent "doc fix" is now significantly lower than previous estimates. The doc fix prevents a scheduled cut in Medicare payments to physicians known as the Sustainable Growth Rate (SGR) formula. SGR was never a real solution to rising health care costs, since Congress has always shelved the steep cut when it was set to occur. Bipartisan legislation was introduced in the House last week to permanently repeal the cuts, and the House Ways and Means Committee outlined a similar solution. No matter what is done regarding the doc fix, Congress must get serious about bending down the health care cost curve.
Deficit a Top Snake in the Grass for Voters – A Quinnipiac University poll finds that the economy and federal budget deficit are the two issues Americans most want addressed in the State of the Union. The poll echoes the results of other recent polls findings these are the top issues. It is fitting as the two issues are so closely connected. A smart approach to reducing the deficit that phases in cuts gradually and contains pro-growth policies can benefit the economy.
Congress Revisits Balancing the Budget Scales – The National Review reports that Senate Republicans plan to offer a balanced budget amendment. The last Congress saw several balanced budget proposals. As we noted at the time, the balanced budget debate rightly shines a light on the need to reform the dysfunctional budget process. However, there are plenty of other options that do not require changing the Constitution and could more easily gain broad support.
Key Upcoming Dates (all times are ET)
- Senate Budget Committee hearing on the Congressional Budget Office (CBO) 2013 Budget & Economic Outlook with CBO Director Douglas Elmendorf at 10:30 am.
- President Obama delivers the State of the Union address to a joint session of Congress at 9 pm.
- House Budget Committee hearing on the Congressional Budget Office (CBO) 2013 Budget & Economic Outlook with CBO Director Douglas Elmendorf at 10 am.
- Senate Finance Committee confirmation hearing on the nomination of Jacob Lew to be Secretary of the Tresaury at 10 am.
- House Armed Services Committee hearing on the impact of the continuing resolution and sequester on defense at 10 am.
- Senate Budget Committee hearing on the "Impact of Budget Decisions on Families and Communities" at 10:30 am.
- House Ways and Means Committee hearing on tax reform and charitable contributions at 9:30 am.
- Senate Appropriations Committee hearing on the effects of sequestration at 10 am.
- House Committee on Education and the Workforce subcommittee hearing on sequestration at 10 am.
- House Energy & Commerce, Health Care Subcommittee hearing on building a future Medicare physician payment system at 10:15 am.
- Dept. of Labor's Bureau of Labor Statistics releases January 2013 Consumer Price Index data.
- Bureau of Economic Analysis releases second estimate of 2012 4th quarter and annual GDP.
- Across-the-board cuts to defense and non-defense discretionary spending prescribed in the Budget Control Act, known as "sequestration," will take effect.
- Dept. of Labor's Bureau of Labor Statistics releases February 2013 employment data.
- Dept. of Labor's Bureau of Labor Statistics releases February 2013 Consumer Price Index data.
- Current continuing resolution (CR) funding the federal government expires.
- Bureau of Economic Analysis releases third estimate of 2012 4th quarter and annual GDP.
- Dept. of Labor's Bureau of Labor Statistics releases March 2013 employment data.
- Congress must pass a budget resolution as specified in the Congressional Budget Act. Also, due to the debt ceiling suspension bill, lawmakers will have their pay withheld after this date until their respective chamber passes a resolution.
- Dept. of Labor's Bureau of Labor Statistics releases March 2013 Consumer Price Index data.
- Bureau of Economic Analysis releases advance estimate of 2013 1st quarter GDP.