Tag Archives: Budget

President Obama submitted his fiscal year 2014 budget on April 10. Some have criticized the President on the ground that the budget was more than two months late. (The statutory deadline is the first Monday in February.) That criticism is fair enough – with the footnote that budget decisions for the preceding, ongoing fiscal year were well behind schedule as well, and in fact were not completed at the turn of the calendar year, when the ink of a President’s budget always has been both figuratively and literally drying. The budget law was written under the presumption that a President would know the budget outcomes for one fiscal year before he was required to prepare and submit the budget for the next.

There was a throwaway comment in the early press that “the President’s budget has virtually no chance of being adopted.” Well, no President’s budget ever is adopted; the Congress always makes changes (if it adopts meaningful budget legislation at all). A much more important test today is whether the President’s budget moves the current fiscal stalemate off of dead center (with the accent on the “dead”).

We will have a deeper account of the prospects for the politics and policymaking of the budget season next week. But the big-picture takeaway from the release of the budget is that this is the biggest and best opportunity to move the ball that anyone in Washington could have had a right to expect. It’s time, guys.

Post-Mortem on the Budget Resolution Debate

March 26, 2013

Joseph Minarik

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This is just to tie up any remaining loose ends for you on the weekend’s legislative action on a congressional budget resolution for fiscal year 2014.

As you heard, the Senate passed its version of a budget resolution, to provide the opposite bookend – on a very, very long shelf – to the House version. Some have argued that the House resolution “jump-started” the budget process, and that the Senate version “set the stage” for a hard and contentious conference. Neither did any such thing. The greatest likelihood, though admittedly not a certainty, is that you already have seen the sum and total of meaningful action on a budget resolution for next year – hence a “post-mortem” is fully in order.

There may be an initial meeting of a conference committee on the resolution, but it most likely will be what in the trade is called a “photo-op” meeting. That is, Members from the two chambers gather, and the press is invited to take pictures. The Members read their opening statements. Then the meeting is adjourned, and the Members leave subject to the call of the chair – a call that never comes. There is no rule that different bills that pass the two chambers must be reconciled and enacted; history is replete with bills that passed the two chambers in different versions and went no further. This instance seems a prime candidate to enter that gallery.

The Budget Act requires that the Congress pass a budget resolution, but it also provides a procedure in case it does not. And no one ever has gone to Budget Jail for failing to pass one; Budget Jail was grossly (indeed totally) understaffed even before the recent spending sequester. You will recall that the recent “no-budget, no-pay” law is satisfied by each individual chamber passing its own budget; there is no requirement that the Congress reconcile the two and pass a single, final budget resolution. So any motivation from that provision has been fully sated.

The passage of the Senate resolution did provide good theater. The Senate normally allows unlimited debate (which is what a filibuster is), but a primary motivation of the creation of the current budget process was to prevent the budget from being talked to death. The compromise that was struck was to allow Senate floor consideration, even after the statutorily limited time for debate has expired, of any and all amendments filed before a deadline. This yields the notorious “vote-a-rama,” during which amendments are voted on even though they cannot be debated. The process ends only when all of the filed amendments are voted upon (typically many are withdrawn without a vote) or the Senators give up in exhaustion, whichever occurs first. This year’s marathon extended almost until dawn on Saturday morning.

But all of those undebated votes have no real significance. The budget resolution is only a concurrent resolution, and cannot become law. Any amendments to the resolution – some mentioned prominently in the press this year relate to the Keystone XL pipeline, sales taxation of Internet transactions, and the 2010 healthcare law’s provisions for a tax on medical devices and a reduction of the maximum contribution to flexible spending accounts for out-of-pocket medical bills – are purely advisory. The recent push for a budget resolution in the Senate was thought by some to be a necessary first step toward meaningful negotiations. That might be, but a more cynical interpretation is that the vote-a-rama provided an unlimited opportunity to force votes on artfully worded amendments for purposes of attack ads for future election campaigns.

Even the most charitable interpretation of the intent of all those amendment votes must include that they do not predetermine any subsequent votes actually to change the law. If a real bill comes along, Senators can find ways to prevent its ever coming to a vote. And there always are details in actual legislation to justify a Senator’s vote that is seemingly contradictory to an earlier vote on an amendment to the budget resolution. A Senator could point to some other provision of a later bill as requiring a contrary vote. The later bill might have an unacceptable budgetary offset to the bill’s cost, or it might have no offset at all. So one should not leap to the conclusion that a vote on an amendment to a budget resolution is a harbinger of future action to the same effect.

It is certainly better to have action on a budget resolution than not. (And if you have a strong position on a particular issue, it is better to have a favorable vote on a budget resolution amendment than not.) To say that a budget resolution is a necessary condition for serious action on our budget problem probably goes too far, though one might make a case that a full and fair debate on a resolution would facilitate success. But it unquestionably would be way off the mark to say that a budget resolution is a sufficient condition for solving our deep-seated problem.

Senate Majority Leader Harry Reid (D-NV) was reported in the press to have expressed skepticism at the prospect for a budget resolution conference. Whether you agree with Senator Reid on the issues or not, he has a good sense of the politics of the Senate – and he has the authority to make the key decisions. To paraphrase an old Washington friend of mine, the House and Senate passage of their budget resolutions plus $2.50 will buy you a day-old cheese sandwich – and not a very good one at that.

No Steps Forward- Any Steps Back?

March 13, 2013

Joseph Minarik

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One can enunciate any number of criteria by which to judge this week’s budget resolution drafts from the House and Senate Budget Committees. But they all boil down to one: Do they help to solve the nation’s long-term budget problem?

And that is not to ask whether, if enacted, they would solve the problem. It is, rather, whether they move us toward enactment of a budget plan that will solve the problem.

By that simple, meaningful standard, the answer thus far is no; there is no reason to expect any positive movement resulting from the release of the two resolution drafts. (The House Budget Committee resolution draft was announced on Tuesday, though what was made public was a backup document, not the resolution itself. The resolution, with plenty of blanks for numbers not yet determined, came today. The Senate Budget Committee has not yet released its version; but by all accounts, the Senate resolution draft will not move us forward either.)

In fact, the lingering question is whether the net effect of all of the new paper might actually be retrograde. In this implicit, slow-moving negotiation, these two resolutions definitely are first offers, not at all best-and-final submissions. And they might even have a little of the air of insult first offers – where two sides who are obligated to negotiate for purposes of appearance go through the motions and put knowingly unacceptable gestures on the table to justify an end to the charade.

In sum, neither side will see anything that they have not seen already; and what they have seen already has not closed a deal. There is no reason to expect anything new or different going forward, barring some unexpected development.

The Discretionary Wild Card

March 8, 2013

Joseph Minarik

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Two weeks ago, we talked about the onset of the sequester – which applies almost exclusively to “discretionary” spending, that is, annual appropriations for federal agencies – and what it implies for both the macroeconomy and the performance of government functions.

Next week, a further development will pull that issue back on stage: House Budget Committee Chairman Paul Ryan (R-WI) will release his budget resolution for next year. As part of the deal struck within the House Republican caucus to pass the fiscal cliff bill at the turn of the calendar year, that resolution will claim to achieve a balanced budget – a deficit of zero – in the tenth year from now (that is, in fiscal year 2023). To reach budget balance that quickly – last year’s House resolution was estimated to achieve balance in 2040 – will require greater savings, and some of those additional savings likely will come from a lower path for discretionary spending than is set under current law – that is, even with the sequester.

Then, to avoid a government shutdown (that is, a lapse of appropriations for federal agencies), the Congress will need to replace the current continuing resolution before its expiration on March 27. That will highlight once more the implications of the level of annual appropriations (although its effect will be restricted to the current fiscal year – fiscal year 2013, which ends on September 30, 2013 – more on that point later).

And at some time in March or April, the President will submit his fiscal year 2014 budget. Many people will rush to see how the budget proposals compare with the House budget resolution, and in particular its FY 2023 budget balance. The President’s proposed future-year levels for discretionary spending will be an important element in determining how that comparison will look. So for yet a third time in just a few weeks, proposals for levels of discretionary spending will get at least a little air time – even though we do not yet have specialty cable channels that focus on the federal budget.

The Sequester: Turf Versus Grass

February 26, 2013

Joseph Minarik

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Just about everybody is familiar with the bureaucratic concept of “turf.” As in, “That’s my turf.” In other words, stay off.

However, experience indicates that there is an associated bureaucratic concept which is much less widely recognized: “grass.” As in, “That’s my turf – so don’t you tell me that I need to cut the grass.”

Both “turf” and “grass” are at play in the current high-level dispute over the sequester of federal spending. It is worth a review of the bidding thus far.

The sequester was written into law in the debt-limit deal of August 2011. It was intended to be a fail-safe device in case the so-called “Supercommittee” failed to achieve its goal of $1.2 trillion of budget savings. The Supercommittee duly failed. The sequester was postponed from the beginning of this year to the beginning of this March – i.e., Friday. The two parties in Washington argue over whose idea it was, who voted for it, and whose intransigence is causing it now to appear inevitable. Those questions may be of academic interest, but not much more.

The importance of Who Shot the Federal Government As We Know It is limited because there is little dispute that the sequester is a Bad Thing. Oh, there are some who say that there is a debt crisis going on, and so we must cut something. But just about everyone recognizes that the sequester will not solve the problem. More specifically, even those who would accept the sequester with the least remorse understand two facts: First, if we do not have the sequester, the federal government’s finances will explode without fundamental reform of health care. And second, if we do have the sequester, the federal government’s finances will explode without fundamental reform of health care. The sequester will only buy time. A little.

That $1.5 Trillion- Give or Take

February 15, 2013

Joseph Minarik

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Over the last few years, both parties have worked together to reduce the deficit by more than $2.5 trillion – mostly through spending cuts, but also by raising tax rates on the wealthiest 1 percent of Americans. As a result, we are more than halfway towards the goal of $4 trillion in deficit reduction that economists say we need to stabilize our finances.

President Barack Obama
The State of the Union Address
February 12, 2013

Many years ago, a seasoned Capitol Hill professional cautioned me about giving any questionable number to a politician. Many have fly-trap minds, and once you put something in, you never can get it out. Any nuanced but only partially understood fact, like a discount-store blowtorch, could be misused with considerable ill effect at some later moment.

This bit of wisdom comes quickly to mind when one hears the current buzz about a mere $1.5 trillion of deficit reduction over ten years ending our budget woes. Some reach that number by the roughest of arithmetic; others use more sophisticated analysis, and even provide important and subtle caveats. But the number, even though it has some limited use, already has left the corral of qualification and analysis far behind.

The simple way to reach that number is the way the President did. Three years ago, Erskine Bowles and Alan Simpson characterized our fiscal plight with a calculation that $4 trillion of deficit reduction would “stabilize the debt.” As the President noted in his remarks, some have estimated subsequent budget action to have achieved $2.5 trillion of that. $4 trillion minus $2.5 trillion equals $1.5 trillion, under either OMB (Office of Management and Budget) or CBO (Congressional Budget Office) scoring.

That little inside-Washington joke is not really a joke, however. Bowles and Simpson’s $4 trillion was derivative of many complex and controversial assumptions, and was calculated at a particular time. Let’s review the numerical spreadsheet, and its even-more-subtle and important conceptual underpinnings.

Counting Budgetary Chickens

January 31, 2013

Joseph Minarik

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Next Tuesday, we will see the new budget projections by the Congressional Budget Office (CBO). It is difficult if not impossible to predict what CBO will say in a new projection. However, there have been some regularities over the years, and there may be a potential trap this time around.

Like the stock market, budget projections tend to overshoot at turning points – in this part of the cycle, appearing (with the wisdom of hindsight) too pessimistic for too long, and then snapping back fairly sharply. In terms of the economy and the budget, we haven’t had a turning point so much as a deep funk. The economy has carried the extraordinary weights of a massive housing overbuild, a once-in-a-lifetime (we pray) financial crisis, and precisely adversely timed near-identical symptoms in much of the rest of the developed world. There is some chance that as the roots of growth begin to strengthen (this week’s largely inventory- and government-driven GDP report notwithstanding), CBO’s forecast will begin to anticipate faster economic growth that will show a similar measure of apparent optimism in the budget numbers over the next few years.

And at the same time, the turn-of-the-year fiscal-cliff bill – the American Taxpayer Relief Act (ATRA) – will show a meaningful improvement in the “current policy” – as opposed to the “current law” – budget projections. The distinction, which is important mostly to people who do not have lives (some of whom may read this blog), has been for the last decade mostly whether the temporary 2001 and 2003 tax cuts were assumed to be continued (current policy) or to expire (current law). The current law baseline is the official headline number mandated in the Budget Act. However, budget wonks, recognizing that the expiration of all or even most of those tax cuts was unthinkable, watched the current policy outlook much more closely. And the expiration of even the small portion of those tax cuts omitted from the ATRA will improve that picture.

A Budget Deal. Two Cheers.

December 19, 2012

Joseph Minarik

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When I left the Office of Management and Budget after eight years, I e-mailed all my colleagues (then and still among the best public servants in the country) that after all of that experience and hard work, I had the OMB thing nailed. If you want to be successful here, I told them, just follow two simple rules:

Don’t sweat the small stuff; and
The devil is in the details.

Similarly today, if you believe some of the commentary about what appears to be an impending budget deal to forestall the “fiscal cliff,” our elected policymakers should follow just two simple rules:

Get a deal that does as much as you can; and
A bad deal is worse than no deal.

Clearly enough, in this instance as well as the earlier one, you have to choose your rule. And in this instance, I vote for rule number one – noting that it is not the end of the story.

Tax Rates, Loopholes, Taxes, Revenues, and Fairness

December 5, 2012

Joseph Minarik, Uncategorized

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There are still optimists in Washington. Many of them probably lean on the old adage attributed (probably wrongly) to Winston Churchill about “…after all of the other possibilities.” But we are running out of time, so we had better begin to discard those other possibilities at a faster rate.

One of the “other possibilities” would be the President’s insistence on increasing tax rates in the highest brackets of the income tax schedule. The President isn’t alone in this focus on tax rates; Nate Silver of the New York Times, who earned plaudits for the accuracy of his analysis of the presidential race this year, weighed in along the same lines on a rumored congressional proposal.

—Back in the Black

The CED blog about the Federal Budget Deficit, Spending and Taxes, and the National Debt.

Archive

Tag Archives: Budget

As Good As It Gets, Realistically Speaking

Post-Mortem on the Budget Resolution Debate

No Steps Forward- Any Steps Back?

The Discretionary Wild Card

The Sequester: Turf Versus Grass

That $1.5 Trillion- Give or Take

Counting Budgetary Chickens

A Budget Deal. Two Cheers.

Tax Rates, Loopholes, Taxes, Revenues, and Fairness

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