September 20, 2014

Washington Budget Report: May 24, 2011

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Debt Limit Disputes Continue

Negotiations to raise the federal debt limit are resuming today between the administration and lawmakers as partisan bickering over the budget continues and newly released projections have underscored worries about Medicare's finances.

The government hit its debt ceiling a week ago but the Treasury says it can avoid default until early August through “extraordinary measures.” Administration officials this month began meeting with congressional negotiators to develop a compromise plan to raise the debt limit while curbing future deficits.

Vice President Joe Biden is chairing the talks. Negotiators have reportedly identified about $150 billion in budget cuts, but that is far short of what Republicans say will be enough to win their support for a debt limit increase.

Meanwhile, recently released “alternative” projections from the actuary for Medicare and Medicaid Services presented an even gloomier financial picture for Medicare than the one that its trustees drew earlier this month.

The actuary says the “sizable differences” between the trustees’ official projections and the alternative ones “highlight the critical importance of finding ways to bring Medicare costs—and health care costs in the U.S. generally—more in line with society‘s ability to afford them.”

Tax reform scenarios also continue to receive close attention on Capitol Hill. The Concord Coalition as well as various bipartisan study panels have pointed out that eliminating “tax expenditures” -- loopholes that favor some taxpayers over others – would allow the government to lower rates and still raise additional revenue for deficit reduction.

Senate Budget Resolution Delayed

Senate Budget Committee Chairman Kent Conrad (D-N.D.) announced last week that the committee would not consider the FY 2012 budget resolution until the bipartisan negotiations led by Vice President Joe Biden are complete. Conrad said “The results of those negotiations may need to be included in a budget resolution that would be offered in the weeks ahead.”

The budget resolution is legally required to be completed by April 15, though the committee’s work has been delayed this year as Conrad has worked to develop a consensus among Democrats on the role that spending and revenues should play in reducing the deficit.

The committee’s ranking member, Sen. Jeff Sessions (R-Al.), described Conrad’s announcement as an “excuse for delay” and accused Democrats of “trying to avoid having to present a budget to the American people.” In a letter released earlier this week, Republican senators urged Senate Majority Leader Harry Reid of Nevada to work with them “to produce a FY 2012 budget resolution that makes significant cuts to federal spending and puts our nation on a fiscally responsible path to eliminating our debt altogether.”

Because the budget resolution includes the allocation to the Appropriations Committee, Conrad’s announcement will likely delay Senate consideration of appropriations bills, increasing the chances of a year-end omnibus bill or another continuing resolution.

The delay is discouraging, though Conrad’s statement that “we will have a budget" is a positive development. Congress should avoid a repeat of the 2011 process in which no budget resolution was passed and appropriations bills were not completed until the second half of the fiscal year.

This week the Senate is expected to vote on the budgets proposed by House Republicans and President Obama.

‘Gang of Six’ Shrinks to Five

Prospects for fiscal reform efforts by the “Gang of Six” senators were left uncertain after one of the Republicans, Sen. Tom Coburn of Oklahoma, walked away from the talks last week, saying he was on “sabbatical.”

On Sunday Sen. Majority Whip Dick Durbin of Illinois, another member of the group, said: “What we need this week is for a bipartisan group of senators to step up and tell us, now the Gang of Five, we want to sit down with you, we want to proceed with you in a bipartisan way to deal with this deficit.”

Coburn said last week that the gang’s talks had “reached an impasse.” Durbin, however, said that the group had been “ready to announce” its recommendations when Coburn decided to walk away. Various reports indicate that Coburn had sought greater Medicare reductions.

Coburn left open the possibility of rejoining the gang’s talks but also said he would release a budget plan of his own that "puts everything on the table and cuts $9 trillion in spending over the next decade."

Earlier this month members of The Concord Coalition's Board of Directors who had served in Congress issued a statement urging the Gang of Six to continue its efforts.

Leaders of Bipartisan Panels Urge Action

The leaders of two prominent deficit-reduction panels worry that elected officials this year will lack  “the courage to forge a comprehensive, multi-year debt reduction plan.” In a guest column last week in Politico, the panel leaders warned against delay and urged political leaders to seek bipartisan consensus.

“Delaying action will make the choices we face increasingly difficult and sharpen the risk of a debt crisis in which bond markets force us to take painful steps,” the panel leaders wrote. “If we fail to act, our nation could face unaffordable interest payments in excess of $1 trillion per year . . .”

The op-ed was written by Alan Simpson and Erskine Bowles, who chaired the President’s bipartisan fiscal commission, and Alice Rivlin and Pete Domenici, who led the Bipartisan Policy Center’s Debt Reduction Task Force.

The four said the experience of their panels showed that bipartisan agreement was possible on broad plans that included cuts in defense and domestic spending, entitlement reform and changes in tax policy.