Debt Agreement Seen as Good, Quick Fix, But Broader Budget Agreement Needed

Published Oct 17, 2013. By Cheryl Bolen. In Bloomberg BNA .

Oct. 16 --The bipartisan agreement crafted in the Senate to temporarily reopen the government and extend the debt ceiling is good as far as it goes, but lawmakers will be in the same position in a few months unless budget conferees can reach agreement on spending for the whole of fiscal year 2014, budget analysts said.

Robert Bixby, executive director of the Concord Coalition, which focuses on fiscal policy, told Bloomberg BNA that the agreement was a good deal to avoid an immediate crisis, but only does what Congress is supposed to do -- fund the government and pay the bills.

“It's kicking the can down the road, but it's better than kicking the bucket, and that's what I think would have happened to the economy had they gone over and not raised the debt limit,” he said. The key is whether, when the budget conference committee convenes, it does anything substantive, Bixby said. “That's a big 'if.' ”

Depends on Committee.

The budget committee, which must report by Dec. 13, could enact policies to carry the government through 2014 without more crises, or go beyond that, Bixby said. “There's nothing to prevent them from doing a longer term deal, that would be terrific,” he said. “But the atmosphere isn't conducive to that right now,” he said.

The committee is likely to concentrate on getting through the 2014 elections, setting appropriations levels and a debt ceiling that will go through 2014, Bixby said. “If they can do more, great, I'm always for the grand bargain, but there isn't a grand bargain environment in town right now,” he said.

Centrists in Congress also have an opportunity to flex their political muscle and come together to get something done, Bixby said.

Price Already Paid.

White House Press Secretary Jay Carney said there were no winners in this agreement because of the harm caused by the government shutdown, now in its 16th day, and by the loss of economic credibility that resulted from flirting with the possibility of a default.

“But there is already a price that has been paid,” he said. The economy has suffered because of the shutdown and the threat of default, and it was wholly unnecessary, Carney said.

The president believes the economy is dependent on the faith and credit of investors around the world, Carney said.

“What the president made clear was his position that he would not allow a situation to develop where he paid ransom to any party in Congress that was trying to extract unilateral political concessions in return for Congress fulfilling its fundamental responsibilities,” Carney said.

Budget Negotiations.

Now, the president hopes to see serious, substantive negotiations around a broader budget agreement, Carney said. “And in that process, hopefully, there'll be a willingness to compromise by both sides,” he said. The president's goal is to reach an agreement that will give Americans increased certainty, the necessary investments to help the economy grow and protections that expand the middle class, Carney said.

The president has many priorities reflected in his budget, including eliminating sequestration, Carney said.

There now seems to be an openness, not just by Democrats, but by Republicans, to forge just such a compromise on broader budget issues, Carney said. “How big that agreement would be will depend on how the negotiations go,” he said.

Focus on Budget.

Maya MacGuineas, president of the Committee for a Responsible Federal Budget and head of the Campaign to Fix the Debt, expressed relief about the measure announced by the Senate on Oct. 16.

MacGuineas said in a statement that she wanted Congress to pass and the president to sign the agreement, then immediately turn to the critical issue of how to put the nation on a sustainable fiscal path.

“It is incredibly disheartening that we are once again relying on last-minute deals that merely delay the real issues instead of addressing them. Playing with default was an incredibly dangerous game, but continuing to delay confronting our debt is letting a fire burn that could get out of control at any moment,” she said.

If lawmakers do not change course, the nation will be dealing with these same issues all over again in only a few months' time, MacGuineas said.

“This agreement provides for a process, through the appointment of budget conferees, to deal with the fact that the country is operating without a budget,” she said.

Congress and the president must use this opportunity to put in place the long-overdue changes of making entitlement programs more sustainable, reforming the tax code, replacing sequestration and putting the debt on a sustainable downward path, MacGuineas said.

Key Vote Alert.

On Oct. 16, the U.S. Chamber of Commerce sent a letter to all members of Congress urging them to vote for the bipartisan Senate agreement.

While important policy issues are at stake in the ongoing debate about federal spending, debts, deficits and entitlements, the full faith and credit of the U.S. should not be subjected to further brinkmanship, said R. Bruce Josten, executive vice president of government affairs at the Chamber.

“The consequences to the U.S. economy and the American business community of a default are too extreme to be allowed to occur,” Josten said.

Default will not contribute to an environment that allows Congress to rein in spending, Josten said.

 

“Groups calling for default are clearly less interested in the Main Street concerns of businesses large and small; these groups overlook the point that a default would result in creditors demanding a premium on U.S. debt, which would greatly exacerbate long-term debt, deficit and spending issues,” he said.