April 19, 2014

Lots To Do, Little Time To Do It In

Syria is not the only challenge Congress faces as it returns to Washington from its August recess. Monday was the first of only nine legislative days that both the Senate and House of Representatives will be in session before the fiscal year ends on Sept. 30. Congress will need to approve a spending plan before then and take action on the debt limit not long after that.

Unfortunately, little progress has been made towards passing a budget this year. The budget resolutions adopted by Senate Democrats and House Republicans are $91 billion apart in overall spending levels, and no appropriations bills have been signed into law.

House Republicans have only been able to muster support for their deep proposed spending reductions in five of twelve appropriation bills, while the only appropriations bill brought to the Senate floor was defeated by a filibuster.

With so little time left on the legislative calendar, Congress is extremely unlikely to finish its appropriations bills on time. That would leave lawmakers with an important choice: adopt a continuing resolution to temporarily fund the government or allow it to shut down.

If that wasn’t bad enough, the government could default within weeks unless Congress raises the debt ceiling. The Treasury warns that it will run out of "extraordinary measures" to avoid default around mid-October. To avoid another tough vote on the debt limit before the next election, Congress would need to increase the debt ceiling by at least $890 billion.

Sequestration will make these challenges even more difficult. Because this year’s spending bills were larger than allowed after the failure of the congressional super-committee, an across-the-board cut of $80 billion went into effect.

If a continuing resolution were once again adopted for spending levels above sequester targets, a larger cut would automatically be made from the allocated amounts for Fiscal Year 2014.

Congress could instead vote to adopt a continuing resolution that reduces overall spending to sequestration targets, thus allowing lawmakers to be more selective about the cuts. Alternatively, they could choose to simply override the sequester and fund the government at higher levels. This option, however, would risk sending a signal to the markets that Congress is reneging on its previous commitments to get the nation's fiscal house in order.

With sequestration cutting deeper into discretionary spending in the coming years -- in addition to the reductions imposed by the Budget Control Act of 2011 -- Congress will find these low levels of discretionary spending increasingly difficult to maintain. It would be wiser to replace the sequester with comprehensive fiscal reforms, including measures to slow the growth of entitlement programs -- a key driver of future deficits.

Another sticking point is Obamacare. Some Republicans say they will refuse to vote for any spending bill that includes funding for the law but Democrats insist it should remain fully funded. Since the Democratic majority in the Senate is unlikely to adopt any bill defunding President Obama’s signature domestic accomplishment, even many Republicans believe their colleagues must relent on this demand if a shutdown is to be avoided.

While a government shutdown would be irresponsible, it would pale in comparison to the damage that would result from defaulting on the debt. If Congress is seen as willing to let the government default, lawmakers would be inviting higher interest rates on the debt and more downgrades in the nation's credit ratings. Furthermore, threatening default could trigger panic in global financial markets. Simply put: Default is not a bargaining chip -- it's fiscal and economic suicide.

Congress has a lot on its plate, and these fiscal challenges threaten to derail other important policy debates as well. Returning lawmakers had better get back to work fast -- nine days is not a lot of time.