U.S. Hill, Administration Face Many Obstacles For Debt Hike, FY'14 Deals

Published Aug 5, 2013. By John Shaw. In Market News International (MNI).

--President, Hill Leaders Prepare For Fall Fiscal Fights On Spending, Debt

Ceiling

--Administration Discussions With Group of Senate Republicans Seems To Be Only

Game In Town

 

WASHINGTON (MNI) - During a budget negotiation last year in which the status of the talks was under dispute by the two parties, House Speaker John Boehner gave reporters a clear assessment of where the negotiations stood from his perspective.

"We're nowhere," Boehner declared.

That appears to be a fair summary of the current state of fiscal discussions as Congress begins its five-week August recess.

"Right now, things look awful," says Bill Frenzel, a former Republican congressman and a guest scholar at the Brookings Institution.

"None of the key players are talking, apart from taking shots at each other in the media. Neither side has signaled any flexibility and there are a lot of things that need to be resolved this fall: the debt ceiling, the 2014 spending bills and the sequester," he said.

Bob Bixby, executive director of the Concord Coalition, said he is also discouraged about the status of fiscal discussions.

"Right now things look pretty bad. Almost nothing has been accomplished so far as it concerns budget policy. Congress will be gone until September and each party seems to assume that negotiations involve the other party accepting its demands," Bixby said.

He added that the three key fiscal issues - FY'14 spending, sequestration, and the debt ceiling - are entangled in a complicated way that will require a modicum of statesmanship to resolve.

"You can't figure out the FY'14 spending bills unless you deal with sequestration and from the Republican perspective you can't deal with sequestration until you deal with entitlements. And from the Democratic perspective, you can't deal with entitlements unless you also deal with revenues. So everything is totally mixed together," he said.

The most pressing issue when Congress returns on Sept. 9 is passing a funding bill to keep the government operating after Oct. 1 when the 2014 fiscal year begins.

The House is scheduled to be in session for just nine legislative days before Oct. 1 while the Senate is scheduled to be in session for 16 days before the new fiscal year begins.

The Senate, under Democratic leadership, has allocated $91 billion more for overall FY'14 discretionary spending than has the House under Republican leadership. There has been no apparent progress in bridging this huge chasm.

So far, the House has passed four of its 12 FY'14 spending bills while the Senate has not even completed its first FY'14 spending bill. No final versions of any bill has been passed.

Boehner told reporters last week that he expects Congress to pass a "continuing resolution for some short period of time."

Boehner did not elaborate on the duration of a stop-gap bill, but some GOP aides have said a two-month stop gap would make the most sense. (Bixby said it may be necessary to pass a number of day-long stop-gap bills before an agreement is reached to even fund the government for 60 days.)

Nor did the Speaker discuss at what level the stop-gap should be funded at. The Senate's proposed FY'14 discretionary level is $1.068 trillion while the House's is $967 billion. One idea that has been floated is funding FY'14 at the FY'13 level of $988 billion.

The fate of the FY'14 stop-gap appears linked to the across-the-board spending cuts called sequestration which began this year and are scheduled to run for nine more years.

White House chief of staff Denis McDonough and White House budget director Sylvia Burwell have been in talks this summer with a group of eight GOP senators, including John McCain and Bob Corker.

Those talks seem to be exploring a plan to replace about $900 billion in scheduled across-the-board spending cuts over the next nine years with entitlement reforms. Frenzel said these talks "seem to be the only game in town" on fiscal matters.

Frenzel added that he is skeptical that any entitlement savings, such as the use of the chained CPI, would be used to replace the sequester but rather would be part of a longer-term deficit deal - if there is one. Bixby also said that he doubts Democrats would accept any entitlement reforms that are not coupled with additional revenues.

House Appropriations Committee Chairman Harold Rogers, a Republican, said last week that congressional leaders should negotiate a "comprehensive compromise that repeals sequestration" and "provides a realistic top-line discretionary spending level" to fund the government in a responsible and sustainable way.

Boehner said that across-the-board spending cuts must continue unless they are replaced by a package of spending "cuts and reforms."

Senate Minority Leader Mitch McConnell has also indicated that he would be open to replace discretionary cuts mandated by the sequester with entitlement reforms. "We'd happily discuss exchanging some of the particular cuts the don't like for government reforms," McConnell said.

As for the debt ceiling, the administration is urging Congress to pass legislation to increase the limit by Oct. 11 but has said that it is not certain when its "extraordinary measures" will reach their limit and require a lifting of the debt ceiling.

Boehner has said repeatedly that any debt-ceiling increase must be coupled with spending cuts and reforms. Several weeks ago he said his 2011 demand that any debt ceiling increase be coupled with spending cuts of the same size remains appropriate for this fall.

President Barack Obama has said repeatedly that he will not negotiate with the GOP over the debt ceiling this year.

Budget experts are uncertain if the next five weeks will be used by the administration and congressional leaders to quietly explore possible fall compromises or just repeat partisan talking points.

"Obviously, with the time so limited before Oct. 1 you would hope that something useful will happen in August. But given the events of the last few months, it's hard to have much confidence that this is going to happen," Bixby said.