U.S. Budget Experts Say Obama Has Chance To Break Budget Impasse

Published Mar 25, 2013. By John Shaw. In Market News International (MNI).

WASHINGTON (MNI) - Congress's return to regular order on fiscal policy has produced the result that many predicted: the House and Senate have passed fiscal year 2014 budget resolutions that are widely -- and even wildly -- divergent and which offer virtually no opportunity for bipartisan compromise.

Budget experts say that any substantial progress on fiscal matters this year appears contingent on President Barack Obama producing a fiscal year 2014 budget in about two weeks that gives Republicans in Congress some indication he's ready to negotiate seriously on entitlement reform which then might persuade the GOP to show flexibility on additional revenues.

Obama is expected to release his FY'14 budget the week of April 8, more than two months after the president customarily produces a budget and after both the House and Senate have passed their FY'14 blueprints.

"The President has put himself in an awkward position by being the last to introduce a budget," said Bob Bixby, executive director of the Concord Coalition.

"I still am not sure why he's waited this long to do so. On the one hand, it provides him with the opportunity to step forward with a compromise proposal that bridges what the House Republicans and Senate Democrats have passed. But the president has not laid the groundwork for a budget this year that goes in a direction that is much different from what he has been talking about for several years," Bixby said.

Bixby said the most likely scenario is that Obama will introduce a "placeholder budget" that reprises old proposals with new numbers. But he said that Obama might also offer a specific proposal such as the implementation of the chained consumer price index to show his commitment to entitlement reform.

"I doubt very much that Obama would offer a detailed series of entitlement proposals in the context of this coming budget. From his perspective this would be negotiating against himself and would give Republicans an opening to pocket his concessions without giving up anything themselves," Bixby said.

Bill Frenzel, a former Republican congressman who is now a guest scholar at the Brookings Institution, said the congressional budget process is highly unlikely to lead to any fiscal breakthrough, but added that the tax reform discussions now underway in both the House Ways and Means Committee and the Senate Finance Committee may be generating some bipartisan trust and cooperation.

Frenzel said Obama's recent outreach to Congress, especially Republicans, is a welcome change in tone that should be followed up on. "The president has seemed interesting in making new friends and speaking in a more conciliatory way. That's good. But I think he needs to follow this up with specific proposals, either in his budget or in a different forum," Frenzel says.

Frenzel also believes a firm Obama proposal to adopt the chained CPI might be a helpful way to jump-start stalled fiscal discussions.

"There is no doubt that we are not going to make any real progress by trying to negotiate between the right wing budget passed by Paul Ryan or the left wing budget written by Patty Murray. That is a dead end," Frenzel said.

He said that if Obama and Congress can resume fiscal talks the coming vote on the debt ceiling late this summer might provide the context and the deadline to craft an agreement.

"Nothing is going to happen very suddenly. But there is a chance that some kind of package can be assembled by late July," he said.

The Senate passed Saturday morning on a 50 to 49 vote, the budget drafted by Murray. It was approved after the Senate considered more than 100 amendments and voted on many of these amendments for about 13 hours.

Murray's budget claims $1.8 trillion in deficit savings over a decade, with $975 billion coming from spending savings and $975 billion coming from additional revenues. Of the spending savings, $275 billion comes from health care programs, $240 billion from defense, $142 billion from non-defense discretionary savings and $76 billion from other entitlement savings. Murray's budget also allocates about $100 billion for economic growth programs.

The House approved the Ryan budget Thursday on a near party-line vote of 221 to 207. No Democrat voted for the plan. All Republicans, except for 10, voted for it. Before passing the Ryan budget, the House rejected five alternative budgets -- four written by Democrats and one by conservative Republicans.

However, the Ryan vote was rejected in the Senate on a decisive 40-to-59 vote, with all Democrats and a handful of Republicans voting against the plan.

Ryan's budget calls for $4.6 trillion in spending cuts producing a small budget surplus in 2023. It calls for the repeal of most of the 2010 health care law, but accepts some of the the provisions that generate cost savings and revenue. It also endorses Medicare, Medicaid and tax reform.

Budget resolutions set broad spending and revenue goals and make deficit estimates. Budget law requires Congress to approve a final budget resolution by April 15, but it seems unlikely that Ryan and Murray will ever negotiate a final agreement.

Murray and Ryan are likely to hold one public conference committee meeting in April to discuss their respective budget resolutions and formally express the desire for a compromise plan. But there seems little prospect that a compromise can be developed based on the two very different budgets by House Republicans and Senate Democrats, budget experts say.

--MNI Washington Bureau; tel: +1 202-371-2121; email: [email protected]