U.S. Hill Budget Chiefs Seem Focused On Modest Fiscal Accord

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

WASHINGTON (MNI) - House Budget Committee Chairman Paul Ryan and Senate Budget Committee Chairman Patty Murray appear to be approaching their private budget talks with a distinctly modest agenda, not even contemplating a 'Grand Bargain' but rather focusing on replacing some of the scheduled sequester spending cuts with a different package of savings.

Ryan and Murray have presided over two meetings of their 29-member House-Senate budget conference committee, but have now retreated behind closed doors to see if they can assemble a narrow agreement.

The House has left Washington until Dec. 2 while the Senate is gone until Dec. 9. The two Budget Committee chairmen are expected to continue their private talks this week and next over the phone.

The House-Senate budget conference committee has been charged to reach an agreement by December 13. The current stop-gap bill funding the federal government expires on January 15.

Ryan and Murray began their budget talks with proposed fiscal year 2014 spending levels that are more than $90 billion apart. Ryan's budget calls for $967 billion in FY'14 spending while Murray's budget calls for $1.058 trillion.

The current stop-gap bill funds the government at the $987 level. Under current budget law, FY'14 spending is set to fall to $967 billion level after January 15 due to the sequester.

Ryan and Murray are exploring if they can reach an agreement on setting a funding level for FY'14 and possibly FY'15 and also if it's possible to replace some of the sequester cuts with a different package of savings.

Bill Frenzel, a former Republican congressman and now a guest scholar at the Brookings Institution, said a modest budget agreement is all that seems realistic at this point.

"I have lost all hope of any kind of long-term agreement. That is just not going to happen. But I think the two chairmen might be able to come up with a small package that sets discretionary spending for FY'14 and possibly FY'15 and cleans up some of the sequester and replaces it with other savings," Frenzel said.

Frenzel said he assumes the replacement savings will come in the form of modest entitlement adjustments and possibly some additional user fees and the auctioning of the broadcast spectrum.

"My guess is that Murray and Ryan could come to a modest agreement pretty easily. But whether they can sell it to a fairly rambunctious House and an almost equally rambunctious Senate is difficult to know," he said.

Bob Bixby, executive director of the Concord Coalition, said that Ryan and Murray both appear determined to accomplish two goals: avert another government shutdown and improve their respective negotiations for broader budget talks that my take place after the 2014 mid-term elections.

"It's hard to be very encouraged about the prospect of an agreement that changes the long-term budget picture until after the midterms in 2014. At this point, the key negotiators seem mostly focused on avoiding a crisis," said Bixby.

"I can envision a minimalist agreement that comes up with some budget savings by doing limited things: increasing aviation fees, increasing some user fees, doing some asset sales, doing the spectrum auction," Bixby added.

Bixby said that while he expects Ryan and Murray to reach a modest agreement that keeps the government operating after January 15 when the current stop-gap spending bill expires, he is uncertain what items congressional leaders might attach to debt ceiling legislation that will be needed next spring or summer.

"I have no idea what the leadership is going to do to push the debt ceiling bill through next spring. I see no sign that (House Speaker John) Boehner is going to be able to apply his formula of insisting that any debt ceiling increase be coupled with at least the same level of savings," he said.

As it pertains to the sequester, Democrats say the scheduled spending cuts should be replaced by a "balanced" package that included spending cuts and additional revenues and these savings should be phased-in carefully so as not to slow the economy.

Republicans argue the nation's fiscal problems are primarily spending ones and call for entitlement reforms to be advanced that could replace at least some of the sequester spending cuts.

A few weeks ago, independent senator Angus King offered a plan to alter the sequester with a package of other spending savings and additional revenues.

King's idea is to replace about half of the sequester cuts, about $455 billion, that are scheduled to occur between fiscal years 2014 and 2021. They would be replaced by $200 billion in revenues generated by closing corporate tax loopholes and $255 billion in entitlement reforms.

King's plan raises $525 billion in additional revenues over 10 years but more than half of that sum would be used to cut the corporate tax rate from 35% to 32.5%. The rest of the revenue would be used to lower the spending caps mandated by the sequester, and it would also set aside $50 billion for infrastructure projects.