U.S. Hill's Fiscal Agenda To Be Driven by Mid-Term Calculations

Published Jan 22, 2014. By John Shaw. In Market News International (MNI).

WASHINGTON (MNI) - Since the fiercely partisan and prolonged fiscal battle of last October, congressional leaders from both parties have conspicuously tried to disengage from high-profile budget brawls.

In the aftermath of the 16-day government shutdown last October and the stalemate over the debt ceiling, Congress has crafted several modest bipartisan budget agreements to keep the government running and debt payments current.

Senate Majority Leader Harry Reid and Senate Minority Leader Mitch McConnell reached an agreement in October that ended the bitter stalemate and funded the government through January 15 and suspended the debt ceiling until February 7.

Then, Senate Budget Committee Chairman Patty Murray and House Budget Committee Chairman Paul Ryan reached an agreement in December that modified the sequester and set discretionary spending levels for the rest of fiscal year 2014 and for FY'15.

Finally, Senate Appropriations Committee Chairman Barbara Mikulski and House Appropriations Committee Chairman Hal Rogers reached an accord last week on a $1.1 trillion FY'14 funding bill that implemented the first part of the Murray-Ryan agreement.

Congress passed the fiscal year 2014 spending bill with large bipartisan majorities. The House approved the $1.1 trillion FY'14 omnibus spending package on a 359-to-67 vote last Wednesday while the Senate passed the measure the next day on a 72-to-26 vote.

Bob Bixby, executive director of the Concord Coalition, says a period of fiscal fatigue and political recalculation is taking place within the Democratic and Republican parties.

"The appetite in both parties to fight over fiscal policy has diminished significantly. This is not because our fundamental budget problems have been solved -- they haven't -- but because the leadership in each party has decided that their political interests are better served in fighting other fights," Bixby said.

"Republicans feel confident that the problems of Obamacare provide them with more than enough ammunition to last at least through the mid-term elections. And Democrats are convinced that focusing on safety net issues such as unemployment insurance and increasing the minimum wage is their best ticket to political survival in what might prove to be a difficult political year for them," he adds.

Stan Collender, a budget expert at Qorvis Communications, argues that congressional leaders have become convinced that fiscal fights which end in ugly stalemates aren't political winners and should be avoided.

"I don't think we have any kind of fiscal truce. What we have is a practical recognition by congressional leadership that there is no political benefit in getting into a fiscal fight in which you don't win. There is also a clear recognition that there is now no prospective for a broad budget agreement. That is not going to happen with the current political alignment in Washington," Collender said.

Both Bixby and Collender believe that House Speaker John Boehner and Senate Minority Leader Mitch McConnell don't want a bitter and prolonged battle over the debt ceiling this winter. Both analysts agree that Republicans are comfortable with their recent device of passing debt limit suspension legislation rather than a bill that increases the debt ceiling by a specific dollar amount.

"While the practical effect is the same, Republicans think debt ceiling suspension bills are less politically dicey that passing increases to the ceiling of hundreds of billions of dollars," says Bixby.

Bixby expects that Republican leaders will craft a debt ceiling suspension bill this winter that has a few policy statements or modest provisions attached to it that Democrats can accept.

Collender agrees. "On the debt ceiling, Boehner is trying to find a way to throw the Tea Party a bone without getting into a huge fight with the administration. And then he wants to move on," he said.

Republican leaders have signaled they hope to settle on a debt-ceiling strategy by the end of the month.

Congress passed legislation in October that suspended the debt ceiling until February 7. Last week, Treasury Secretary Jack Lew, at an event at the Council on Foreign Relations, urged Congress to move quickly.

"If Congress is looking at the numbers the way we are, we have the best data, they would be looking more at the end of February than any time in March," Lew said.

Reid, the Senate Democratic leader, offered debt ceiling remarks last week that perplexed many, especially since they came hours after Lew's urgent call for prompt congressional action.

"That's not urgent," Reid said of debt ceiling legislation. "We keep getting different numbers on that. We think sometime in May that will be necessary. Maybe it's April. But we'll deal with it," he added.

Reid's spokesman sent out an email to clarify the confusion.

"Senator Reid agrees with Secretary Lew that Congress needs to extend the nation's borrowing authority well in advance of when extraordinary measures are exhausted," it read.