Line Items: Storms Edition

Weathering the Storms – Stormy weather has wreaked havoc on much of the country recently, including Washington. Meanwhile, storms of a different nature, namely a potential government shutdown and debt ceiling fight, are brewing. These squalls may not hit until fall, but they could pack a punch if policymakers don’t act now to mitigate them. The inability of lawmakers to address our fiscal challenges no doubt has contributed to the record-low approval ratings for Congress, with a new Gallup poll showing public confidence in the institution almost in single digits. Policymakers need to rise above the storm clouds on the horizon.

Debt Limit Tempest Builds – It may seem far off now, with the Congressional Budget Office (CBO) saying it may be as late as November until the statutory debt ceiling is reached, but the contours of the coming debt limit debate are forming now. House Speaker John Boehner (R-OH) said that the House GOP wants “cuts and reforms” greater than the amount of the debt ceiling increase in order to go along with raising the limit. He also signaled that they will seek long-term savings through entitlements. On the other hand, the White House wants a clean debt limit increase separate from deficit reduction discussions. Some lawmakers are trying to prevent the last-minute brinksmanship of the last debt ceiling fight by proposing legislation that would suspend lawmaker’s pay until the debt ceiling is raised.  

Flurry of Activity on Appropriations – The other major approaching front concerns the federal spending process. While lawmakers are busy moving legislation funding the various federal departments, because of deep differences between the House and Senate it doesn’t look hopeful that Congress will agree on spending measures by October 1, the beginning of the fiscal year, meaning that a stopgap measure will be required to prevent a government shutdown. The Senate wants to approve about $91 billion more in spending than the House by ignoring the budget caps under sequestration. While the House plans to abide by the general level of the caps, it wants to spend more on security than the caps allow, cutting more spending from other areas to make up the difference. The Senate Appropriations Committee has come up with a preliminary schedule calling for 8 of 12 spending bills to be marked up within the next month. On Thursday the Committee will vote on the spending allocations to each of the 12 areas. Senate Minority Leader Mitch McConnell (R-KY) promised to block any Senate spending bill that does not abide by the caps. In the House the process is already under way, with the House Appropriations Committee passing Agriculture and Defense spending bills last week.

Bipartisan Lightning Strikes Three Times – While finding broad bipartisan support for a comprehensive fiscal plan remains difficult, collaboration across party lines is sprouting up on more targeted bills. Senators Tom Coburn (R-OK), Jeff Flake (R-AZ), Angus King (I-ME), and Joe Manchin (D-WV) introduced legislation to end the practice of overlapping unemployment and disability insurance payments, which could reduce the deficit and pave the way to broader Social Security reform. Representatives Patrick Murphy (D-FL) and David Joyce (R-OH) introduced the SAVE Act to make the federal government more efficient, including reforms recommended by the Government Accountability Office (GAO) to end government duplication and overlap. And a bipartisan group of Senate and House members introduced legislation to reduce waste, fraud and abuse in Medicare and Medicaid.  

Barnstorming for Tax Reform – The leaders of the two congressional tax-writing committees, Sen. Max Baucus (D-MT) and Rep. Dave Camp (R-MI), continue to push for fundamental tax reform. Camp is meeting individually with each member of his committee and held the latest in a series of hearings on the topic last week. Baucus plans to release a timeline soon detailing how he will push the issue on Capitol Hill and his committee continues to churn out options papers. And the two will hit the road travelling the country to seek input from Americans and advance the issue. 

Debt Wildfire Partially Contained for Now, But By No Means Extinguished – With Standard & Poor’ s changing its long-term credit outlook for the U.S. from “negative” to “stable” some are arguing this is a sign that we can give up on further deficit reduction and even pull back some of the savings already enacted. But S&P did not upgrade U.S. credit back to AAA and its rosier outlook, like that of CBO, assumes that sequestration stays in place. The Washington Post notes that our long-term debt problems remain and that a debt plan is required to create fiscal space to deal with any additional financial crises we may face. CRFB board member Bill Frenzel also argues that we haven’t solved our fiscal problems and board member Gene Steuerle writes on the false stimulus versus austerity dichotomy. And the International Monetary fund (IMF) also mentioned the need to replace the sequester with a long-term plan. The good news is that the White House and congressional Republicans continue to meet and discuss a comprehensive debt deal and that long-term savings are being discussed. But the talks still have not progressed very far.     

Sandbags Not Enough to Stop Pentagon Flooding – According to CQ (subscription required) Defense Secretary Chuck Hagel has rejected requesting supplemental funding from Congress to meet an anticipated budget shortfall. Instead he wants Congress to replace sequestration with a comprehensive deficit reduction plan that will allow the Pentagon to spend more in the short run while cutting more in the long run.

Key Upcoming Dates (all times are ET)

June 18

• Dept. of Labor's Bureau of Labor Statistics releases May 2013 Consumer Price Index data.
• Senate Finance Committee hearing on health care costs at 10 am.
• Senate Budget Committee hearing on the President's FY 2014 budget request for education with Education Secretary Arne Duncan at 10:30 am.

June 19

• House Committee on Ways and Means Social Security Subcommittee hearing on the Social Security Disability Insurance program at 10 am.
• House Budget Committee mark-up of budget process reform bills at 10 am.

June 20

• House Committee on Ways and Means Health Subcommittee hearing on the 2013 Medicare Trustees report at 9:30 am.
• Senate Appropriations Committee hearing to adopt FY 2014 spending allocations and mark-up spending bills for Military Construction-Veterans Affiars and Agriculture at 10:30 am.

June 26

• Bureau of Economic Analysis releases third estimate of 2013 1st quarter GDP.

June 28

• The date Treasury Department expects a nearly $60 billion payment from Fannie Mae, which will help delay the time by which lawmakers will need to raise the debt ceiling.

July 5

• Bureau of Labor Statistics releases June 2013 employment data.

July 16

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

July 31

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