Line Items: Veterans Day Edition

Saluting Service – Today we salute those who have served the United States in the military with a federal holiday. While many have a day off, lawmakers are taking an extended break from Washington ahead of some bruising budget battles. The House returns to work tomorrow from over a week of recess as the Senate enjoys its own respite this week. But policymakers can’t get away from dealing with unresolved fiscal issues. Several deadlines loom and the U.S. Government Accountability Office (GAO) put out a brief but informative video last week laying out what the national debt is and why it is important. As we pause to honor our veterans, voters aren’t in much of a mood to give much respect to lawmakers as Congress deals with approval ratings at record lows. Will budget talks provide legislators an opportunity to step up? 

Budget Conference Has Tough Calls Ahead – The budget conference committee convenes its second formal meeting on Wednesday. The panel will hear from Congressional Budget Office (CBO) director Douglas Elmendorf on the budget and economic outlook. The meeting will come exactly a month before the deadline for the conference to report to Congress. Given the short time frame, the focus is on a smaller deal setting a budget and delaying sequestration for a year or two. Yet, the divisions preventing a bigger deal are still present. Democrats want additional revenue as part of any deal, while Republicans are not budging on their stance against more taxes. Democrats put out a list of tax breaks they want to limit to offset sequester changes. We examined this list of “tax expenditures” to see how much savings could be achieved. Follow our “Tax Break-Down” series looking at more tax expenditures that are potentially ripe for reform, our latest looks at the Low-Income Housing Tax Credit. There could be a less contentious path to a deal; Politico lists ideas (subscription required) that could raise revenues without increasing taxes, which could open the way to a deal.     

Taxing Matters – Speaking of taxes, efforts to fundamentally reform the tax code continue. Both Senate Finance Committee chair Max Baucus (D-MT) and House Ways and Means Committee chair Dave Camp (R-MI) plan meetings with members of their respective committee next week according to Politico Morning Tax. Sen. Baucus said he plans to release his first draft of comprehensive tax reform in legislative form within two weeks. Rep. Camp could also unveil his proposal within the same time frame. 

More at Stake – While the focus is on the December 13 deadline for the budget conference to report and the January 15 expiration of the continuing resolution, the beginning of the year brings several other deadlines, one of which is the expiration of expanded unemployment benefits. Renewing the benefits for another year would cost about $24 billion while letting them expire would impact some 3 million unemployed workers by the middle of the year according to recent reports. Additional expirations on January 1 include various “tax extenders”, the “doc fix” and the farm bill. See our “Fiscal Speed Bumps” infographic for more fiscal deadlines.  

Big Problems Will Just Get Bigger – While the budget conference appears to have little appetite for negotiating a “grand bargain” to comprehensively address the debt, policymakers will not be able to ignore the larger problems forever. A new report from the Congressional Budget Office (CBO) finds that more federal dollars are being transferred to the elderly as opposed to younger generations. As we point out, this generational transfer means that more government funding will go to insurance programs like Social Security, Medicare and Medicaid and less will go to investments that can improve standard of living for future generations. Because of this, we urge that Social Security be a part of the budget conference discussion and suggest how that could happen. 

Key Upcoming Dates (all times are ET)

November 13, 2013

• Budget Conference Committee hearing on the budget and economic outlook with Congressional Budget Office (CBO) director Douglas Elmendorf at 10 am.
• Joint Economic Committee hearing on the economic outlook with White House Council of Economic Advisers chair Jason Furman at 2:30 pm.

November 20, 2013

• Bureau of Labor Statistics releases October 2013 Consumer Price Index data.

December 13, 2013

• Date by which the budget conference committee must report to Congress.

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.