November 24, 2014

Washington Budget Report: January 21, 2014

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Congress Finally Clears Low Bar It Set For 2014 Budget

The $1.1 trillion spending bill for Fiscal 2014, signed into law late last week by President Obama, demonstrates that compromise and bipartisan cooperation are still possible in Washington -- so long as the two parties set a very low bar for success.

A budget deal in December set the total amount of “discretionary spending” -- which Congress approves on an annual basis -- for Fiscal 2014 and 2015. The legislation approved last week for 2014 fills in the details in all 12 discretionary areas that are supposed to be covered by regular appropriations bills.

This “omnibus” is roughly split between defense and non-defense spending. It covers nearly a third of the federal budget through Sept. 30. It does not include entitlement programs like Social Security and Medicare, nor does it cover subsidies embedded in the tax code.

The legislation received strong bipartisan approval with votes of 359-67 in the House and 72-26 in the Senate last week.

This legislation means there will be no government shut-down for the remainder of Fiscal 2014. Moreover, in a welcome change from the first third of the fiscal year, federal agencies and departments now know what their final budgets look like.

These are rather small accomplishments. Washington is still just focusing on the short term. Once again elected officials have postponed action on the nation’s larger fiscal sustainability challenge, which is rooted in an aging population, growing health care costs and a grossly inefficient tax system.

Nor is it certain that the overwhelming support for the omnibus bill signals any real change in the recent pattern of budgeting by crisis. In fact, storm clouds are again building over the need to increase the federal debt limit within the coming weeks.

Treasury Secretary Jack Lew last week said the latest data indicates that Treasury’s borrowing authority, including the usual “extraordinary measures” approved by law, would more likely expire “at the end of February than anytime in March.”

Republicans say they plan to seek Democratic concessions in return for an increase in the debt limit. The Obama administration has reiterated that it will not negotiate over the debt limit. It is an all-too-familiar scenario and threatens to derail Fiscal 2015 budget negotiations under “regular order” before they begin.

Given that Congress has already approved the policy choices that will require additional borrowing, a protracted debate over whether to pay the bill is not warranted. The creditworthiness of the United States should never be subject to doubt.

 

Federal Cuts Add to Difficulties For States, Cities

The State Budget Crisis Task Force says some federal deficit-reduction efforts have aggravated structural problems in the budgets of state and local governments that they have done little to address.

Former Federal Reserve Chair and Concord Coalition board member Paul Volcker co-authored the task force’s final report with Richard Ravitch, a former lieutenant governor of New York. They urged state and local governments to deal with their budget problems, but also suggested that federal policymakers focus more attention on how their deficit-reduction efforts impact other levels of government.

The report recommends that Congress create an office, possibly attached to the Congressional Budget Office, to monitor and analyze how federal policies could affect state and local budgets.

In this year’s State of the State address, National Governors Association Chair Mary Fallin of Oklahoma spoke about some of the issues raised in the task force report, stating that federal policies should not shift overly burdensome costs to the states.

State and local policymakers, like their federal counterparts, must address the structural imbalances in their budgets to protect taxpayers now and in the future. Officials at all levels of government must work together to implement sound policies that improve the fiscal health of the states and the country.

 

A New Year's Challenge: Fiscal Fitness

The gyms are packed this month as people try to follow through on their New Year’s resolutions to get into better shape. Sara Imhof, Midwest regional director for The Concord Coalition, wrote in an op-ed Sunday that the nation’s fiscal fitness needs improvement as well.

“In both cases, getting into shape can be so daunting that it is easy to get discouraged -- and good intentions often fall by the wayside,” Imhof wrote in the Cedar Rapids Gazette in Iowa.

While some short-term progress has been made on the federal budget, Washington still needs to address the biggest fiscal challenges, including assistance for an aging population and the unsustainable growth of the federal debt.

Today Concord and U.S. Rep. Bruce Braley are presenting Principles & Priorities, a public interactive deficit-reduction exercise, in Marshalltown and Cedar Rapids, Iowa.

“What I love most about doing these programs ,” Imhof says, “is seeing how average Americans are willing to come together to confront difficult choices, work out their differences and find solutions. “