New Congress Faces More Budget Battles

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The 113th Congress convened last week amid widespread concern that the fiscal cliff legislation – signed Wednesday by President Obama – set the stage for a series of “mini-cliffs” and intense political struggles over federal budget issues early this year.

The Concord Coalition, the Campaign to Fix the Debt and many others who support fiscal responsibility had pushed last year for a comprehensive approach to budget reform – or at least a framework for the new Congress to quickly move forward on it. In a new blog post, Concord Coalition Executive Director Robert L. Bixby agrees with remarks last week by retiring Senate Budget Committee Chairman Kent Conrad (D.-N.D.), who said the new legislation was a short-term fix that simply postponed badly needed deficit reduction work.

In fact, according to the Congressional Budget Office, the fiscal cliff deal – which focused largely on tax cuts – will increase federal deficits by $4.6 trillion in the coming decade relative to what had been current law. The legislation failed to address key parts of the budget, including the need for broad reforms in the entitlement programs and the tax system.

For the country’s future, Conrad warned in his parting remarks to Capitol Hill colleagues, “it is critically important that the next Congress, in its early days, try to get back to doing the grand bargain, the big deal” that could stabilize the debt in the coming years and eventually start bringing it down.

Conrad noted that the federal government is borrowing 31 cents of every dollar it spends – an improvement over the recent past, but still unsustainable. And he refuted those who say that this is just a spending problem or just a revenue problem.

“This is a problem of the relationship between spending and revenue,” Conrad said. “The gap – much higher spending than we have revenue – is what leads to deficits and leads to additions to the debt.” As he noted, federal revenues are near a 60-year low as a share of the economy, while spending is near a 60-year high.

With the federal government again bumping up against its statutory debt limit, Congress will soon need to raise that limit to avoid default and pay for previously approved spending and revenue policies. Some Republicans, however, are characterizing a debt limit increase as a concession to President Obama that they will not approve without getting something in return. Obama says he will not be drawn into negotiations over the debt limit.

Other key fiscal decisions facing the new Congress: What to do about the “automatic” spending cuts that lawmakers agreed last week to postpone for two months, and how to deal with the expiration in late March of the continuing resolution that is funding the government for the current fiscal year. Like the debt limit increase, these issues are essentially leftovers from the partisan stalemates of the last Congress.

There are also some intra-party tensions, with both Obama and House Speaker John Boehner drawing some criticism from members of their parties who were disgruntled with various aspects of the fiscal cliff deal. Boehner was re-elected speaker last week but did not receive the support of a dozen Republican House members.

External links:
Jan. 2 Senate Speech by Senator Conrad
Once Again, Washington Punts on Fiscal Reform (Jan. 1 Concord Blog Post)
A Deal But Not a Solution (Campaign to Fix the Debt)
Moody’s Anticipates Further U.S. Fiscal Action Following “Fiscal Cliff” Deal
The “Fiscal Cliff” Deal (CBO Blog Post)
Treasury Department Information and Warnings on Debt Limit
The Debt Limit: History and Recent Increases (Congressional Research Service)
Debt Limit Analysis (Bipartisan Policy Center)

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