Line Items: Packing Up the Baggage Edition

Heading for the Exits – This is the final week before Congress begins its five-week August recess. Lawmakers have a lot baggage to pack up before they leave town. As such, there is a flurry of activity to wrap up work on items such as student loans and spending bills before lawmakers head home. The stage is also now being set for the fights that will begin as soon they return as the budget battles are set to be revived with a potential government shutdown, the need to lift the statutory debt limit, and further work on tax reform.

House Set to Vote on Student Loan Bill – The House of Representatives could end the drama over student loans this week when it votes on the bipartisan student loan legislation approved by the Senate. We applauded the compromise for dealing with the problem in a permanent and fiscally responsible way and also noted that it isn’t a bad deal for students. We also took issue with some of the criticisms The New York Times had against the bill. 

Appropriations Move...Towards Government Shutdown? – Both the House and Senate are busy marking up fiscal year 2014 spending bills before the recess, yet no progress is being made to bridge the more than $90 billion gap between the spending levels in the two chambers. The difference centers around the fact that the Democrats who control the Senate want to get rid of the sequester, while Republicans who control the House want to leave it in place. The full House last week passed the Defense spending bill, while the Senate Appropriations Committee approved spending bills for Financial Services and State-Foreign Operations. Both the full House and Senate are expected to pass the Transportation-Housing and Urban Development spending bill this week, though the two measures are $10 billion apart, which is indicative of the deep divide in Congress on discretionary spending overall. Lawmakers will have only three weeks from when they return to approve all appropriations bills and avoid a federal government shutdown when the current fiscal year ends on September 30. Both sides appear to be digging in for a confrontation.

Laying Down Markers for Upcoming Fiscal Battles – Last week, President Obama began setting the stage for this fall’s fiscal battles by kicking off a series of speeches across the country on the economic challenges facing the country and his vision for addressing them. On Tuesday he continues the tour in Chattanooga, Tennessee. The White House is staking its position ahead of potentially nasty fights over government funding and raising the statutory debt ceiling. While neither side publicly seems to be giving any ground, eight Republican senators met twice last week with the White House to discuss a deal that could diffuse the situation. The talks reportedly involve changes such as implementing the chained CPI and making wealthier Medicare beneficiaries pay higher premiums. These changes could be part of a package changing the sequester. Check out the other fiscal speed bumps ahead with our infographic. 

Tax Reform Looks for Brotherly Love – Senate Finance Committee Chair Max Baucus (D-MT) and House Ways and Means Committee Chair Dave Camp (R-MI) take their tax reform tour to Philadelphia today as they move forward with fundamental reform of the tax code. Several senators submitted ideas for what tax breaks to maintain under the blank slate" approach ahead of the Friday deadline imposed by Baucus. Meanwhile, in the House, the New Democrats Coalition is looking to get involved in the effort. And Baucus said he plans for his committee to mark up reform legislation this fall. The Tax Foundation begins a series of case studies looking at different tax expenditure reform ideas, starting with the mortgage interest deduction. We offered some ideas for tax reform beyond tax expenditures in a recent Tax Notes article. In addition, the Campaign to Fix the Debt made the case for fundamental tax reform and offered principles in a brief last week.

CBO Looks at Economic Impact of Sequester – On Friday, the Congressional Budget Office (CBO) released a study estimating that repealing sequestration would improve the economy in the short term, but growth would be reduced in the longer term because of increased debt. CBO also notes that "boosting debt above the amounts projected under current law would diminish policymakers’ ability to use tax and spending policies to respond to unexpected future challenges and would increase the risk of a fiscal crisis." As we point out, the better approach would be to replace sequestration with a comprehensive fiscal plan with targeted cuts in all areas of the budget that are much more gradual than sequestration. 

New Bill Will Better INFORM the Consequences of Fiscal Decisions – Last week, Sens. John Thune (R-SD), Tim Kaine (D-VA), Rob Portman (R-OH), and Chris Coons (D-DE) introduced the Intergenerational Financial Obligations Reform (INFORM) Act, which aims to improve the budget process by providing analysis on how budgets and major legislation would affect younger generations further down the road. The legislation calls for extending the window in which the fiscal impact of legislation is measured beyond the usual ten years.

Key Upcoming Dates (all times are ET)

July 30

• Senate Budget Committee hearing on containing health care costs at 10:30 am.

July 31

• House Appropriations Committee mark-up of the Fiscal Year 2014 Interior and Environment appropriations bill at 11 am.
• Joint Economic Committee hearing on how tax reform can boost economic growth at 2 pm.

August 1

• Senate Appropriations Committee mark-up of the Fiscal Year 2014 Defense appropriations bill at 10:30 am.

August 2

• Bureau of Labor Statistics releases July 2013 employment data.

August 16

• Dept. of Labor's Bureau of Labor Statistics releases June 2013 Consumer Price Index data.

August 31

• Bureau of Economic Analysis releases advance estimate of 2013 2nd quarter GDP.