Big Budget Challenges Loom in September

Blog Post
Friday, September 03, 2021

This week on Facing the Future our guest was Austin Smythe who has over 30 years of experience working in both the legislative and executive branches of the Federal government. Concord Coalition Policy Director Tori Gorman joined the conversation as we previewed a host of looming budget challenges that Congress and President Biden are facing in September. These include a reconciliation bill of up to $3.5 trillion, with half of that offset by tax increases or spending cuts, completion of all 12 annual appropriation bills to avoid a government shutdown (or pass a temporary patch), and avoid defaulting on our debt.

For context, the Congressional Budget Office (CBO) projects that even with no additional legislation current law would produce $12 trillion of new debt over the coming 10 years. That would leave the debt at its highest recorded level relative to the economy, with annual budget deficits approaching $2 trillion by 2031. 

Smythe and Gorman, who have both worked on past reconciliation bills as congressional staffers, described the procedural and political trade-offs of using this special process to speed Senate legislation past the usual 60-vote threshold. As an exception to the Senate’s “regular order,” reconciliation puts certain limits on what the bill can contain. Chief among them is the prohibition against matter that isn’t strictly budgetary which is enforced via the Senate’s Byrd rule. Provisions in a reconciliation bill found to violate the Byrd rule are subject to removal.

Smythe, a former staff director of the House Budget Committee, predicted that Democratic leaders “are going to do a lot of work in advance to make sure they eliminate all the Byrd rule violations, or at least limit them. A lot of this will not be in the public spotlight.”

Gorman added that the procedural hurdles of the Byrd rule, and the possibility of provisions being removed due to violations of that rule, makes reconciliation a difficult process for creating new programs as the Democrats are considering. “You will hear Senate staffers talk about how the Byrd rule and reconciliation allow you to pass legislation really quickly, but it doesn’t necessarily mean that that legislation is good. The Byrd rule essentially makes bad law,” Gorman said.

On the debt limit, Smythe noted that in the past increases or suspensions have often been combined with other measures in a large bipartisan budget agreement. This time, however, with Democrats pushing an ambitious spending agenda that Republicans vigorously oppose, he does not see an obvious path for resolving the standoff.

“There has to be some compromise on the debt limit, but to do that it's going to require Democrats to make concessions to Republicans that I don’t think they’re going to want to do,” he said. While he doesn’t believe that anyone wants a default to occur, he added “I don’t know how it’s going to get resolved.”

Gorman said that both sides are playing “a gigantic game of chicken.” She offered as a possibility that a debt limit suspension could become part of a massive year-end bill that also includes FY 2022 appropriation bills, extension of expiring tax cuts, and the bipartisan infrastructure bill along with some budget reforms as “window dressing” that could make it more palatable for Republicans. “I see a potential path,” she said, “but I would not assign any probabilities to it whatsoever.”  Hear more on Facing the Future. I host the program each week on WKXL, NHTalkRadio.com (N.H.), and it is also available via podcast. Join me and my guests as we discuss issues relating to national fiscal policy with budget experts, industry leaders, and elected officials. Past broadcasts are available here. You can subscribe to the podcast on Spotify, Pandora, iTunes, Google Podcasts, Stitcher or with an RSS feed. Follow Facing the Future on Facebook, and watch videos from past episodes on The Concord Coalition YouTube channel.