‘Line’ Items: Heat is on Edition

Beat the Heat…and the Clock – Washington is dealing with stifling heat, but that isn’t the only thing making policymakers sweat. As thermometers reach their limit, so is the debt. But unlike the temperature, the debt won’t go down by itself. They say that you should avoid black when it’s this hot, and the politicians seem to be heeding the advice, staying away from any deal that could get the U.S. budget back in the black. Instead, the preferred color is red, with red ink accompanying the red hot temps. Will there be any relief soon?

Washington on the Hot Seat This Week – Staring down an August 2 debt limit deadline, leaders in Washington seem no closer to a deal to raise it after countless meetings and statements. The latest attempt at a “grand bargain” between President Obama and House Speaker Boehner coupling a debt ceiling increase with significant deficit reduction fell apart late Friday. Even more troubling is that there is no agreement on a Plan B, with House Republicans and Democrats who control the Senate going separate ways on fallback options. The House GOP wants a two-step process to raise the debt limit that includes about $1 trillion in immediate spending cuts and a debt limit increase that would last until around the end of the year, with a legislative commission to recommend further cuts of at least $1.6 trillion to trigger another debt ceiling increase. On the other hand, Senate Majority Leader Harry Reid is pushing an increase that will last past the 2012 election and include $2.7 trillion in deficit reduction that does not include revenue or mandatory spending cuts. The lack of agreement and action on the debt limit and federal budget deficit is apparently affecting the already battered image of Washington as a recent poll finds voter dissatisfaction with the federal government rising to levels not seen in about twenty years.

Balanced Budget Amendment Moves to the Front Burner – House Republicans are considering a balanced budget amendment to the Constitution as a part of their new debt limit plan. A balanced budget amendment vote on the House floor is scheduled for this week and a new proposal was added to the mix last week. See our one-stop budget process resource for more on balanced budget amendments and other fiscal tools that could potentially help reduce the national debt.

Gang of Six Fired Up – Meanwhile, the Gang of Six continues to promote their proposal unveiled last week as the best chance for a comprehensive solution with broad bipartisan support. CRFB has provided a simple explanation of the Gang of Six plan and a look at how the Gang’s approach could be implemented and enforced.

House Funds Itself – The House found time last week to approve its own budget for next year as it passed the FY 2012 Legislative Branch appropriations bill. Lawmakers sought to show that they will not immunize themselves from the budget-cutting trend as the measure sliced Congress’ budget by 6.4%, reducing funding for all congressional offices and agencies except for the Capitol Police. Even though the Senate did pass a Military Construction-Veterans Affairs spending bill, there is still no fire on that side of the Capitol to move spending legislation as no further appropriations action is planned until the fall.

Key Upcoming Dates

July 26

• Senate Finance Committee hearing on “Perspectives on Deficit Reduction: A Review of Key Issues” at 10 am.
• House Ways and Means Committee hearing on "Tax Reform and Consumption-Based Tax Systems” at 10 am.
• Consumer Confidence Index for July released by The Conference Board.

July 27

• Joint Economic Committee hearing on “Maximizing America’s Prosperity: How Fiscal Rules Can Restrain Federal Overspending” at 10 am.
• Federal Reserve Board releases its Beige Book on regional economic conditions.

July 29

• Second quarter GDP released by the U.S. Commerce Department.

August 2

• Treasury Secretary Geithner says that the U.S. will default on its obligations by August 2 if the statutory debt ceiling is not increased before then.