April 20, 2014

Washington Budget Report: July 19, 2011

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Coburn, Gang of Six Propose Deficit-Reduction Plans

This week Sen. Tom Coburn (R-Ok.) proposed a comprehensive plan to reduce projected federal borrowing by $9 trillion over ten years and the bipartisan “Gang of Six” senators outlined a $4 trillion deficit-reduction plan to their colleagues. President Obama this afternoon praised the Gang of Six plan as a “very significant step” that is “broadly consistent” with the approach he has urged.

Coburn also announced today that he is rejoining the Gang. His “Back in Black” report includes over 600 pages of detailed recommendations for achieving $9 trillion in deficit reduction from the entire federal budget, including domestic discretionary spending, defense, entitlement programs, and revenues.

The plan includes nearly $1 trillion in savings from eliminating and reforming tax expenditures, which have increased in recent years and often benefit special interests. Coburn also released a report detailing wasteful spending in his own state.

Coburn, along with Senators Saxby Chambliss (R-Ga.), Kent Conrad (D-N.D.), Mike Crapo (R-Id.), Richard Durbin (D-Ill.), and Mark Warner (D-Va.), has been a member of the bipartisan  “Gang of Six” that has worked this year to develop a deficit-reduction plan. Coburn had withdrawn from the group after a disagreement over spending cuts.

Coburn announced his decision to return at a meeting today where the group presented the outlines of its plan to Senate colleagues. The proposal is based on the recommendations of the President’s fiscal commission and would reduce the deficit by nearly $4 trillion over ten years.

While members of both parties will undoubtedly criticize many aspects of each plan, Coburn and the other members of the “Gang of Six” deserve credit for going beyond speeches on fiscal responsibility to place specific proposals on the table for discussion. Before rushing to attack the difficult choices made in the plans, critics should propose alternatives.

Senate Leaders Aim to Resolve Debt Limit Crisis

Senate Majority Leader Harry Reid and Senate Republican Leader Mitch McConnell continue to work on a plan that would let President Obama raise the federal debt limit in increments while allowing congressional Republicans to repeatedly vote against the increases.

Recent reports indicate the plan also envisions spending cuts and a special congressional commission charged with making recommendations for further deficit reduction.

In the next few days, however, Republicans also plan to focus attention on a “cut, cap and balance” proposal. It calls for spending cuts, a cap on future spending, and congressional approval of a balanced budget amendment to the Constitution. The Democratically controlled Senate, though, is unlikely to approve that plan.

The Treasury has warned that unless the debt limit is raised by Aug. 2, the government could default on its financial obligations. Last week credit rating agencies reiterated their warnings that the U.S. government could lose its top credit rating.

Even if the debt ceiling is raised, Standard & Poor’s said, the government’s credit rating could still be downgraded if Washington fails to agree on $4 trillion in deficit reduction over the next decade.

If a large, comprehensive fiscal reform package cannot be reached before Aug. 2, Concord Coalition Executive Director Robert L. Bixby has suggested a short-term compromise that would raise the debt limit by $1.9 trillion and establish fiscal targets and automatic triggers to ensure those targets are met.

Troubling Provisions in Balanced Budget Amendment

Republican lawmakers this week are rallying behind a version of the balanced budget amendment that would enshrine a super-majority requirement for tax increases, set an arbitrary limit on spending, and hinder the government’s ability to respond to wars, recessions and other national crises.

The Concord Coalition said in a press release this morning that these provisions moved away from the idea of a balanced budget amendment to the Constitution as a bold statement of principle: that one generation of Americans should not bind future generations with crushing debt.

“The whole point of a balanced budget amendment is to ensure that future generations are free to make their own fiscal decisions,” said Robert L. Bixby, Concord’s executive director. “It is inconsistent with that freedom to forever mandate a particular level of spending or to permanently favor spending cuts over revenue increases as the manner of managing these decisions.”

The proposed amendment would limit federal spending to 18 percent of the Gross Domestic Product (GDP). There would be exceptions for wars but not for recessions, natural disasters or other national emergencies.

Many elected officials who are pushing for the proposal have recently voted in favor of trillions of dollars in additional deficit spending. “Any proposal for a balanced budget amendment, to be taken seriously, should be accompanied by a proposed balanced budget,” Bixby said.

Congress Moves Forward on 2012 Appropriations

While the final outcome of the appropriations process this year will likely be affected by negotiations over the debt limit, in the meantime Congress has continued to make progress on the FY 2012 bills.

Last week, the House passed the Energy/ Water bill and has now completed five of the twelve bills. The House Appropriations Committee completed action on three bills: Interior/ Environment and Related Agencies, Commerce/ Justice/ Science, and Legislative Branch. The House is expected to consider the Legislative Branch bill on the floor this week.

The Senate process continues to be complicated by the lack of a budget resolution providing an allocation to the Appropriations Committee. Last week, the Senate began considering the Military Construction/ Veterans Affairs bill -- the only bill that has been reported by the Appropriations Committee. The Senate is expected to resume consideration of the bill this week.

Sen. Jeff Sessions (R-Al.), ranking member of the Senate Budget Committee, raised concerns that the Senate is violating a provision in the Budget Act prohibiting the consideration of appropriations bills prior to passing a budget resolution. After Sessions raised a budget point of order, the Senate waived the Budget Act. A more responsible course would have been to consider the budget resolution required by law.

Medicare Cost-control Panel Under Fire

As congressional hearings last week made clear, some lawmakers in both parties continue to chafe at a key cost-control element in last year’s health care legislation: an advisory panel that several years from now could help curb excessive Medicare spending.

Critics of the idea are pushing for repeal of the Independent Payment Advisory Board (IPAB), arguing that it would infringe on congressional authority. But Kathleen Sebelius, secretary of Health and Human Services, pointed out last week that the board will function as a backstop for lawmakers: “If Congress is actually paying attention to the bottom line of Medicare, IPAB is irrelevant.”

While many Republicans oppose IPAB as part of their broader resistance to the 2010 legislation, some Democrats also object to the review board. The Concord Coalition, however, considers IPAB an important cost-control effort that should ideally be strengthened to help keep Medicare on a sustainable path.

Debits & Credits

Fresh Perspectives: Sen. Michael Bennet (D-Co.) offers a timely reminder for everyone to keep an open mind on fiscal reforms: "If challenges to our ideological beliefs or to the politics that historically define our debate are off the table, then as a generation we cannot meet the challenges we face, and we are not going to be able to support the aspirations we have for our kids and our grandkids."

That’s, Um, Not the Way It Works: Ignoring repeated warnings from credit rating agencies, Rep. Mo Brooks (R-Ala.) says that Congress can leave the federal debt ceiling alone without any problems.  “In fact,” he says, “our credit rating should be improved by not raising the debt ceiling.” Good luck with that, congressman.