April 23, 2014

Washington Budget Report: May 31, 2011

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A Vote and More Discussion on the Debt Limit

Later today House Republicans plan to vote down an initial request from the administration to approve an increase in the federal debt limit without spending reductions. The vote will be largely symbolic, coming after several weeks of negotiations between the administration and top  lawmakers over hundreds of billions of dollars in spending cuts that would accompany a higher debt ceiling.

The vote is also intended to underscore Republicans’ demands in advance of their meeting Wednesday with President Obama. The Treasury has warned that the government could default if the current $14.3 trillion debt limit is not raised by early August.

Vice President Joe Biden has chaired the negotiations this month between administration officials and six lawmakers who were appointed by party leaders. Last week Biden reported that the talks had made progress toward substantial spending cuts. The parties remain far apart on additional tax revenues, however, with Biden saying they will be part of the solution and Republicans insisting that they are off the table.

Another set of talks are continuing among a small bipartisan “gang” of senators, despite one of their members recently stepping away from the discussions. Some of the remaining five senators indicated last week that they remained committed to their search for a long-term fiscal plan.

Senate Rejects Budget Proposals

Last week the Senate rejected motions to proceed to four budget proposals. Like this week’s scheduled House vote on the debt limit, the votes were largely symbolic and expected to fail. The Senate considered budgets proposed by President Obama and House Republicans, as well as balanced budget proposals offered by Sen. Pat Toomey (R-Pa.) and Sen. Rand Paul (R-Ky.).

During the debate, Sen. Jeff Sessions (R-Al.) criticized the decision of Democrats to vote on competing proposals without first offering an alternative reported by the Senate Budget Committee. His complaint is understandable; the Democrats’ refusal to offer a budget allows them to oppose GOP proposals without supporting anything themselves. If the Senate fails to pass a budget resolution for the second year in a row, it will also make it difficult to engage the public on the policy choices that are at stake.

Senate Budget Committee Chairman Kent Conrad (D-N.D.) referenced the ongoing Biden negotiations and said, “It makes no sense for us to go to a budget markup at this moment that would simply be a partisan markup when bipartisan efforts are underway.”

On the other side of the Capitol, the House has completed its work on a budget resolution and continues to make progress on appropriations bills.

The House Appropriations Committee approved subcommittee allocations and reported the first two FY 2012 appropriations bills: Homeland Security and Military Construction/ Veterans Affairs. Both bills are expected to be considered on the House floor this week. The House subcommittee last week approved the Agriculture appropriations bill, which is scheduled to be considered by the full committee this week.

The Senate Appropriations Committee has yet to consider any of the FY 2012 bills.

‘Fiscal Summit’ Features Six Long-Term Plans

Six diverse organizations offered proposals for broad fiscal reform last week at the second annual “Fiscal Summit” in Washington hosted by the Peter G. Peterson Foundation.

Although the plans differed in a variety of ways, all called for substantial changes in current federal policies in an effort to reign in projected federal deficits over the next decade and beyond. Significantly, the plans demonstrated that fiscal responsibility can have a conservative or liberal policy perspective. What's important is that spending and tax policies be consistent -- something notably absent from current policy.

Peter G. Peterson, who is chairman of his organization as well as president of The Concord Coalition, said the six plans – developed with grants from his foundation -- come at a “pivotal and hopeful moment” when more and more Americans are focusing on the nation’s fiscal challenges.

Former President Bill Clinton, the summit’s keynote speaker, said bipartisan cooperation was possible but that Democrats would have to accept changes in entitlement programs and Republicans would have to accept higher tax revenues. Clinton also said more should be done to educate the public about the fiscal problems and potential solutions.

Other speakers included Republican Gov. Mitch Daniels of Indiana, who said his experience with that state’s budget demonstrated that although citizens may not like individual pieces of fiscal reform, they will appreciate the overall results. “I think it is very important not to sell the American people short,” he said.

The groups that presented plans at the summit were the American Enterprise Institute, the Bipartisan Policy Center, the Center for American Progress, the Economic Policy Institute, the Heritage Foundation and the Roosevelt Institute Campus Network.

Deficit Reduction Can Be ‘Win-Win’

Elected officials often approach discussions about deficit reduction as a zero-sum game in which  compromise amounts to defeat. But as various experts and bipartisan groups have demonstrated, certain policy options could bring results that should please both parties.

“The best ideas for the most effective ways to reduce the federal budget happen to be win-win ideas, ‘bipartisan’ in that the goals and priorities of both Democrats and Republicans are promoted rather than sacrificed,” Diane Lim Rogers, chief economist for The Concord Coalition, writes in a recent guest column in The Christian Science Monitor.

Bringing down the deficit, for example, would save money on interest costs, strengthen the economy and lessen the debt burden on our children and future generations – things that both parties can cheer.

Another example is tax reform. Eliminating a multitude of tax breaks (known as "tax expenditures") could avoid the need for either large increases in marginal tax rates on higher-income households or large cuts in programs that benefit low-income households.

Reforms in Foreign Aid Are No Panacea

With only 1 percent of the federal budget, foreign aid makes up a much smaller part of the country’s fiscal problems than many people believe, according to Rebecca Williams of the Henry L. Stimson Center.

In a guest blog posting for The Concord Coalition, Williams proposes several foreign aid reforms, including a better strategy in linking aid to national security, more program prioritization, and improved coordination. But she stresses that policymakers should not be distracted from dealing with problems in larger parts of the federal budget.

“Foreign aid is but one piece of the larger puzzle, something to be evaluated like every other component of federal spending,” Williams writes. She concludes that reforming foreign aid won’t eliminate the need to make “tough choices” on Medicare, Medicaid, Social Security and defense.