April 19, 2014

Washington Budget Report: May 8, 2012

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House Bills Would Help Replace ‘Automatic’ Cuts

The House Budget Committee approved legislation yesterday to block most of the automatic spending cuts scheduled to take effect next year and also passed a reconciliation bill with savings intended to help replace the cuts.

Because the Joint Select Committee on Deficit Reduction failed to reach an agreement last year, the Budget Control Act requires a sequester to automatically reduce spending by $1.2 trillion over the coming decade.   

To help replace the cuts, the House budget resolution instructed six committees (Agriculture, Energy and Commerce, Financial Services, Judiciary, Oversight and Government Reform, and Ways and Means) to produce legislation with net savings of at least $261.5 billion over ten years.  

The reconciliation bill combined the recommendations from the committees.These included proposals to cut food stamps and Medicaid, repeal portions of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and require federal employees to contribute a higher portion of their salaries to their retirement pensions.

The full House is expected to consider both bills this week. However, the Senate has not passed a budget resolution including reconciliation instructions and is not expected to approve the House legislation.

The Concord Coalition has urged Congress not to abandon the automatic cuts without approving credible alternatives for deficit reduction over the coming decade.

First 2013 Appropriations Bill Heads to House Floor

After last week’s recess, the House is expected to continue work this week on the Fiscal Year 2013 appropriations bills. The first of the bills, Commerce-Justice-Science, is scheduled to be considered on the House floor this week, and House subcommittees are scheduled to consider the Defense, Military Construction-VA, Homeland Security, and State-Foreign Operations bills.

Prior to the recent congressional recess, the Senate Appropriations Committee approved the Agriculture and Energy/ Water bills.

Complicating this year’s appropriations process is the fact that the House and Senate are working from different allocations. Senate Budget Committee Chairman Kent Conrad filed allocations that comply with the $1.047 trillion discretionary spending cap in last year’s Budget Control Act (BCA), though the House Budget Resolution included an allocation that is $19 billion below the BCA agreement.

Jeffrey Zients, acting director of the Office of Management and Budget, has said that President Obama will not sign any appropriations bills until the House indicates it will “abide by last summer’s agreement,” and yesterday the administration specifically threatened to veto the House Commerce-Justice-Science bill.

Fiscal Reform Means Difficult Choices

The need for sweeping, long-term changes in the federal budget has been underscored by recent reports and other developments: A fresh warning on the unsustainable paths of entitlement programs, projections of another trillion-dollar-plus deficit this year, more unrealistic proposals in Congress and on the campaign trail.

In an op-ed last week in the San Jose Mercury News, however, Concord Coalition Executive Director Robert L. Bixby noted some positive signs as well. He again praised 38 House members from both parties, including California Democrat Rep. Jim Costa, for their support of a compromise budget plan based on the work of the bipartisan fiscal commission appointed by President Obama in 2010.

Bixby said the proposal in the House “signaled growing frustration over partisan bickering -- and reflected confidence that average Americans stand ready to support difficult but necessary decisions to put the nation on a more sustainable course.” He also lauded continuing efforts by a bipartisan group of senators known as the “Gang of Six.”

In conducting deficit-reduction exercises with voters around the country, Concord has found that Americans of all ages and backgrounds are willing to accept substantial sacrifices and trade-offs to put the country on a more sustainable path.

Concord and the Mercury News are co-hosting another such exercise Wednesday night in San Jose. The program is open to the public; see concordcoalition.org for details.

Read more with San Jose Mercury News Op-Ed on Federal Budget Reform

Perils of High Debt Include Impatient Creditors

History is filled with examples of governments that got into trouble by running up large debts, a phenomenon that is particularly appropriate to recall in early May.

That’s because Cinco de Mayo – misunderstood by many as Mexican Independence Day – is rooted in the Second Republic of Mexico’s difficulties in the early 1860s with heavy debts owed to France, Spain and Great Britain, as explained in a recent blog by David O’Donnell, The Concord Coalition’s development director.

When Mexico delayed its debt payments, the creditor nations took military action. On May 5, 1862, the badly out-numbered Mexican army pulled off an upset over French forces. But O’Donnell points out that this much-celebrated victory was short-lived: “The French regrouped and enhanced their collection methods by taking Mexico City, toppling the Mexican army and installing Maximilian I as the new leader of Mexico.”

Incurring national debt, O’Donnell notes, “does have consequences.”

Read more with A Cautionary Tale of Cinco de Mayo (That Doesn’t Involve Tequila)