Line Items: Bargains Edition

Deals to be Had – We survived Black Friday, Cyber Monday and Giving Tuesday. While the door buster bargains may be gone, there are still deals for the taking in Washington. Namely, lawmakers have striking deals on a budget and farm bill on their wish lists. With a Congress that is on pace to go down as the least productive in history, legislators have to be in the mood for bargains. Although progress has been very slow, there are signs of progress. The House is back from Thanksgiving break this week while the Senate is still home. The House would like to wrap things up and adjourn by December 13, the deadline for the budget conference committee to report a deal, and several deadlines loom at the end of the year. Prepare for the next big holiday rush.

Budget Blowout – The lead negotiators in the budget conference committee, Rep. Paul Ryan (R-WI) and Sen. Patty Murray (D-WA), appear to be close to an agreement that would establish a budget framework for the rest of this fiscal year and possibly next year and mitigate some of the automatic sequester cuts. The prospective deal would likely set a spending level for this fiscal year somewhere in between the $967 billion approved by the House and the $1.058 trillion passed by the Senate. Some of the sequester cuts over the next two years could be replaced by cuts elsewhere in the budget and with additional revenues by increasing fees such as those for airline security. While the committee has until December 13 to report a deal, appropriators are pushing for quicker action so they have time to produce a spending plan based on the topline numbers ahead of January 15, when the current stopgap measure funding the government expires. Appropriators wanted a deal by Monday so that they can get to work. If the committee fails to reach a deal, a bipartisan group of senators is prepared to pick up the slack and work on an agreement and House leaders say they will move another stopgap continuing resolution at the $967 billion level in that case.   

Cultivating a New Farm Bill – As many of us continue to recover from excessive consumption of turkey and other foods, lawmakers are working on renewing a major farm bill. Food stamps and crop subsidies continue to be the key sticking points. As negotiators continue their talks ahead of a January 1 deadline, some are broaching the possibility that the matter could be rolled up into a budget deal. 

Dealing with Medicare Physician Pay – Another January 1 deadline involves the so-called “doc fix” regarding the formula for the paying Medicare physicians. Policymakers are motivated to agree on a permanent solution to the perennial problem of avoiding a steep reduction in payments to Medicare physicians because the cost of a SGR fix has dropped dramatically. As part of this effort, the key congressional negotiators recently reached agreement on how Medicare reimburses physicians for certain services and procedures. Payments for some services would be decreased and redistributed to other services that are currently viewed as undervalued.

Extending the Tax Extenders Debate – Numerous tax provisions face yet another January 1 deadline. The so-called “tax extenders” consist of 55 tax measures, including a corporate research and development tax credit, which have been routinely extended each year. Extending them for another year would cost about $54 billion. According to CQ (subscription required) the provisions will likely not be renewed by the end of the year, but some could be extended retroactively, perhaps as part of a comprehensive tax reform package.

Getting Less Than They Bargained for – Even if the budget conference committee reaches a deal, it will be a very small one that will likely not improve the long-term fiscal outlook. As we have been pointing out, “The Longer We Wait, the Tougher the Choices Become.” The longer we wait to implement the savings necessary to put the national debt on a sustained, downward path as a share of the economy, the more severe the deficit reduction will be. We also provided some thoughts on how to assess policies effectively through disregarding temporary effects and timing shifts, particularly making sure that permanent tax rate cuts aren’t paid for with temporary revenue raisers. Timing shifts are one of the gimmicks we warn about in a new paper, along with war drawdown “savings,” ignoring policies that are routinely “patched,” double-counting, excessive back loading, shifting sequester cuts, and trust fund revenue transfers. Relatedly, we warn against the idea of applying savings from the fiscal cliff deal to repeal 60 percent of the sequester.  

Key Upcoming Dates (all times are ET)

December 12, 2013

• Senate Finance Committee executive session to consider legislation to repeal the Sustainable Growth Rate (SGR) - "doc fix" - at 10 am.

December 13, 2013

• Date by which the budget conference committee must report to Congress.
• Target adjournment date for the House.

January 1, 2014

• The "doc fix," temporary tax extenders, extended unemployment insurance benefits, and the farm bill expire.

January 15, 2014

• The continuing resolution funding the federal government expires.
• 2014 sequester cuts take effect.
• First set of IPAB recommendations expected.

February 7, 2014

• The extension of the statutory debt ceiling expires.