|4-Track Process: 2009 Appropriations; Financial Sector; Stimulus; 2010 Budget||2d Track: Stabilizing the financial sector and reestablishing credit flows||3rd Track: Enactment of Economic Stimulus Legislation||4th Track: Transmittal of an FY 2010 Budget to Congress||Obama's Fiscal and Economic Policy Team|
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Dec. 1: House Democratic leaders meet with leadership of the National Governors Association to discuss impending economic stimulus legislation
Dec. 2: "Deadline" for U.S. automakers to provide detailed plan to Congress
Dec. 3: Senate Banking Committee hearing on possible bridge loans for U.S. automakers
Dec. 5: House Financial Services Committee hearing on possible bridge loans for U.S. automakers
Dec. 8: Congress reconvenes for possible consideration of bridge loans to U.S. auto companies
Jan. 6: House and Senate convene for 111th Congress and begin assembling economic stimulus bill
Jan 20: Presidential Inauguration; Presidential transition team aiming at quick enactment of economic stimulus bill
Late January: CBO's annual budget and economic outlook (for fiscal years FY 2009 - 2019)
Late January/February: Enactment of remaining FY 2009 appropriations
March 6: Funding for much of the Federal Government expires under the terms of the current continuing resolution (see article below)
March/April: President Obama to transmit FY 2010 budget proposal to Congress
April/May: Congressional action on a 5-year or 10-year Budget Resolution
In considering the fiscal and economic challenges facing the new Obama Administration, it is helpful to visualize a four-track process:
1st Track: Completion of FY 2009 Appropriations
This year's appropriations process was one of the worst on record in terms of Congress passing the 12 regular appropriations bills. In fact, in 2008, only one appropriations bill made it to the House Floor.
There were two reasons for the serious disruption of the regular appropriations process. First, President Bush threatened to veto any appropriations bills that exceeded his requests, and Democrats--as reflected in the Budget Resolution--called for nearly $25 billion more than the President requested. Second, House Republicans attempted to amend appropriations bills with off-shore oil drilling amendments, strongly opposed by many Democrats.
Consequently, in late September, Congress enacted a stopgap measure to keep Federal programs operating. The stopgap measure was a hybrid of an "omnibus" appropriations bill and a "continuing resolution":
The stopgap provision did not provide inflation adjustments for the covered agencies.However, some specific programs did receive increases: the low income home energy assistance program (LIHEAP) received a $2.5 billion increase over '08; Pell Grants for higher education received $2.5 billion over '08; and the WIC program received $1 billion over '08 to assist with nutrition for new mothers and their children.
In addition, the bill included $23 billion for disaster relief, and authorized $25 billion in loans to the auto industry to retool and develop more fuel efficient vehicles. (The auto industry is currently seeking an additional $25 billion bridge loan to forestall bankruptcy.)
In the coming weeks, the Obama Transition Team will work with congressional appropriators on an appropriations measure to keep Federal programs operating beyond March 6, 2009, and at levels closer to Congress' FY 2009 Budget Resolution.
The Washington Budget Report is maintaining an ongoing summary of actions taken by the Treasury, the Federal Reserve, FDIC, and other agencies to stabilize the financial sector and reestablish credit flows.
Click here to view a Financial Crisis Timeline.
In addition, WBR is examining the fiscal impact of each of the actions. A key issue of concern is whether recent actions taken by the Fed have been financed by increased Treasury borrowing or increasing the money supply.
Answer: Currently, the Treasury has deposited $479 billion at the Fed, which has allowed the Fed to expand its lending programs without increasing the money supply. The money deposited by the Treasury does not support any particular lending program.
(Thank you to the Congressional Research Service for clarifying this issue.)
In announcing his budget and economic team last week (see the article below), President-elect Obama emphasized that work to develop a far-reaching stimulus measure would begin immediately, particularly in light of recent Commerce Department reports that the economy shrunk by 0.5 percent in the third quarter.
[The National Bureau of Economic Research, a panel of academic economists charged with the official designation of business cycles, said that the United States economy has been in recession since December 2007, when economic activity peaked.]
Obama declined to specify a size for the stimulus measure but tasked his economic and budget team to develop an "aggressive economic recovery plan" that would create or save 2.5 million jobs. Some Democrats have suggested the package might be in the range of $500 to $700 billion.
Congressional Quarterly reports that Democratic congressional leaders are aiming to have legislation ready to sign shortly after Obama is sworn in as President on January 20. (Congress reconvenes on January 6.)
Items likely to be included in the stimulus package are:
Background.--The first economic stimulus bill this year was signed into law on February 13, 2008 and cost $152 billion (HR 5140). It provided tax rebates for individuals and business incentives.
In late September, the House passed a second, $61 billion economic stimulus bill 264-158 (HR 7110), despite a presidential veto threat. However, Senate attempts to pass a similar stimulus bill failed when proponents fell 8 votes short of the 60 votes needed to shut down a Republican filibuster.The Senate bill (S. 3604) also drew a presidential veto threat. CBO cost estimate of HR 7110
Both of the September stimulus bills would have extended unemployment benefits, and provided funding for infrastructure projects, state Medicaid programs, and food stamps.
While FY 2009 appropriations and a major economic stimulus plan are being expedited, President-elect Obama's new Administration will be simultaneously developing an FY 2010 Budget for transmittal to Congress. The 2010 Budget is technically due the first Monday in February 2009, but new Administrations are generally accorded flexibility to develop and transmit their first budget submission by early April.
The FY 2010 Budget transmittal will provide Congress with its first opportunity to view the Administration's long-term budget priorities in detail.From a strategic point of view, provisions that may be controversial--such as tax hikes for higher income Americans--are more likely to be considered in the FY 2010 budget process rather than in the January stimulus bill. The reason is that the FY 2010 congressional budget process can initiate a filibuster-proof "Budget Reconciliation" measure.
Peter Orszag, Director, Office of Management and Budget. Orszag has served as Director of the nonpartisan Congressional Budget Office since January 2007 and served as an economist in the Clinton White House. As OMB Director in the Obama Administration, Orszag will be responsible for developing and defending comprehensive Federal budget proposals for consideration by Congress. Orszag's Deputy at OMB will be Rob Nabors, senior Democratic staffer at the House Appropriations Committee and a former OMB staffer during the Clinton Administration.
Timothy Geithner, Secretary of the Treasury. Geithner has been President and CEO of the Federal Reserve Bank of New York since 2003 and, in that capacity, has served as Vice Chairman of the Federal Reserve's Open Market Committee which formulates monetary policy.
Lawrence Summers, Chairman, National Economic Council. Summers served as Treasury Secretary during the Clinton Administration from 1999-2001, and as president of Harvard University from 2001 to 2006. As Chairman of the NEC, Summers will coordinate Administration economic policy.
Christina Romer, Chairman of the White House Council of Economic Advisers. Romer has been an economics professor at the University of California at Berkeley since 1988.
Paul Volcker, Chairman, President's Economic Recovery Advisory Board. Volcker served as Chairman of the Federal Reserve Board of Governors from 1979 to 1987, president of the Federal Reserve Bank of New York from 1975 to 1979, and undersecretary of the Treasury from 1969 to 1974. Volcker's staff director at the Advisory Board will be Austan Goolsbee, an economist from the University of Chicago.
Melody Barnes, Director, Domestic Policy Council. Barnes was chief counsel to Sen. Edward Kennedy at the Senate Judiciary Committee and more recently served as executive vice president at the Center for American Progress.
America's Priorities: How the U.S. Government Raises and Spends $3 Trillion Per Year, by Charles S. Konigsberg, Editor, The Concord Coalition's Washington Budget Report.