October 20, 2014

Washington Budget Report: June 7, 2011

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Rigid Positions: a Stone Wall and a Blank Slate

Elected officials still seem locked into their negotiating positions on the federal debt limit,  leading Moody’s to warn that it could soon consider downgrading the government’s credit rating “due to the very small but rising risk of a short-lived default.”

The Treasury projects that without congressional action, the government will exhaust its borrowing authority on Aug. 2.

“Although Moody’s fully expected political wrangling prior to an increase in the statutory debt limit,” the ratings agency said Thursday, “the degree of entrenchment into conflicted positions has exceeded expectations.”

Robert L. Bixby, executive director of The Concord Coalition, writes in a recent blog post that Republicans “have chained themselves to a rigid negotiating position” against tax increases, even when accompanied by substantial spending cuts. Meanwhile, Senate Democrats have rejected four budget plans while clinging to “the safety of silence” by failing to offer their own alternative.

"Picture a stone wall negotiating with a blank slate,” Bixby writes. “It is hard to imagine how this can lead to a fruitful negotiation."

The House last week held a symbolic vote against the idea of a “clean” debt limit increase, meaning one without any provisions for deficit reduction. President Obama later held separate meetings with House Republicans and House Democrats.

Debt limit negotiations between administration officials and top lawmakers are scheduled to resume this week. These talks, chaired by Vice President Joe Biden, have reportedly identified substantial spending cuts. Bixby warns, however, that “familiar obstacles” such as differences over taxes and Medicare reform remain.

It is unclear whether a small bipartisan “gang” of senators can make further progress on a broad, long-term plan for fiscal reform with one of the group’s key Republicans on what he has described as a “sabbatical.”

Read more with Can't Get There From Here

Detouring Around Tough Choices on Transportation

Transportation spending will likely return to the agenda on Capitol Hill in the months ahead. The highway authorization bill expired in 2009 and an extension expires at the end of September. The Congressional Budget Office estimates that the U.S. spends about $160 billion annually on highways, including $40 billion from the federal government.

Federal spending is funded primarily through fuel taxes that are deposited into a federal trust fund. The gas tax has not been increased since 1993, and trust fund revenues have not kept pace with highway spending in recent years. From 2008 to 2010, Congress supplemented the fund with about $35 billion in revenues from the Treasury.

A new report by Smart Growth America and Taxpayers for Common Sense highlights some of the funding challenges facing policymakers. The report concludes that poor road conditions have become “a large and growing financial liability for the states.” The states would need to spend $43 billion per year for 20 years to bring roads currently in poor condition up to good condition and maintain them, according to the report.

The increasing gap between revenues and spending will be one of the key obstacles facing policymakers considering a new highway bill. An honest discussion of the trade-offs needed to fund transportation priorities is long overdue and should be on the agenda. Proposals for new spending should be paid for with credible offsets that are explained in detail.

House Passes First 2012 Appropriations Bill

Last week, the House continued to make progress on appropriations bills for Fiscal Year 2012. The House passed the Homeland Security bill by a vote of 231-188 -- the first of the 2012 bills to clear the House. The House also began debate on the Military Construction/ Veterans Affairs bill and is expected to resume its consideration after this week’s recess.

Prior to considering the Homeland Security bill, the House approved a deeming resolution to permit its budget resolution to be enforced in the House. This marks the second year in a row that a procedural shortcut was necessary because Congress failed to agree on a budget resolution. While the House has passed a budget resolution this year, the Senate Budget Committee has delayed consideration of one until bipartisan debt limit negotiations are complete. The budget resolution should have been completed by April 15.

Also last week, the House Appropriations Committee approved the Agriculture bill and subcommittees completed work on the Defense bill and the Energy and Water bill.

The Importance of Medicare Reform

Two budget experts who are part of The Concord Coalition’s Fiscal Solutions Tour emphasize the importance of Medicare reform in separate blog postings on The American Square.

Joe Antos of the American Enterprise Institute criticizes elected officials who downplay Medicare’s impact on the federal budget and want to keep it off-limits in talks over raising the debt limit. Medicare, he notes, “has long outpaced economic growth, absorbing increasing shares of the budget with no end in sight.”

Isabel Sawhill of the Brookings Institution says the critical point is that the health system must be made more efficient: “Almost everyone agrees that we are getting poor value for our health dollar. Medicare’s open-ended fee-for-service system does not solve the problem; it exacerbates it.”

College Students Focus on Fiscal Challenges

Many older Americans pay close attention to the big federal entitlement programs that provide them with benefits. But a group of college students in Iowa urges younger people to also focus attention on these programs – and on how politicians approach the need for reform.

“Our generation,” the students wrote in a recent op-ed in the Iowa City Press-Citizen, “will likely need to continue supporting the current group of retirees as well as transition to a system in which we will have to support more of our own retirement costs. Therefore, we have a special interest in how our society deals with these issues.”

The students wrote the guest column after attending events in Iowa last April that were part of The Concord Coalition’s Fiscal Solutions Tour.

Among the students’ recommendations: Prompt action rather than delay, a bipartisan approach, health care reforms and a simpler, more efficient tax system.

Debits & Credits

Recalling a Tax Compromise: Mississippi Gov. Haley Barbour sensibly suggested this week that Republicans could consider accepting tax increases as one part of an agreement to slash the federal deficit if the deal is “the best we can get for  the country.”  The former chairman of the Republican National Committee recalled that President Reagan accepted a similar compromise.

Over-the-Top Rhetoric on Medicare: House Budget Chairman Paul Ryan blasts the new Independent Payment Advisory Board (IPAB) as a “rationing board” of “unaccountable bureaucrats to price control.” Actually, the board’s members will be confirmed by the Senate and prohibited by law from rationing or reducing Medicare benefits. Senate Majority Leader Harry Reid, meanwhile, claims the Republicans are offering a plan to make “the sick sicker.”