StanCollender'sCapitalGainsandGames Washington, Wall Street and Everything in Between

Expect Budget Hand-To-Hand Combat Over The Next 18 Months

02 Aug 2011
Posted by Stan Collender

Get Prepared for Hand-to-Hand Budget Warfare

By Stan Collender
Roll Call Contributing Writer
Aug. 2, 2011, Midnight

By the time you read this, one of two things will have happened: Either the shouting about the debt ceiling will have turned into complete silence because the deal was enacted, or it will have grown into the decibel equivalent of a multiengine military jet going full-throttle during a rock concert because the deal was voted down (or postponed).

Regardless of whether the agreement announced Sunday is a done deal or just the latest failed political courtship that ultimately is replaced by something else, it’s absolutely certain Congress and the president, the House and Senate, and Democrats and Republicans will all be fighting constantly over the budget during the next 18 months

This will certainly be true if the deal negotiated during the weekend isn’t enacted and an acceptable substitute isn’t quickly found. If that happens, the debt ceiling fight that has so dominated the discussions within and outside the Beltway during the past few months not only will continue but will get more intense as the Treasury deals with the reality of not being able to borrow, lawmakers face increasingly angry constituents and Wall Street deals with the looming prospect of a downgrade in the nation’s credit rating.

Something similar will happen even if the deal is enacted. In fact, the only real difference will be that instead of being ad hoc, the budget battles will be more structured.

The agreement calls for an immediate $400 billion increase in the federal debt ceiling, an amount that analysts say will get the government through the end of September. At that point, the president will have to request an additional $500 billion increase in the amount the government may borrow.

That will trigger the first round of the new disapproval process that — barring a Katrina-like natural disaster, a terrorist attack on U.S. soil or a military situation — will keep Congress, the White House, Wall Street and the media completely preoccupied for weeks.

The presidential request to borrow more very likely will be followed by a disapproval debate and vote in both chambers that will be followed by a presidential veto. The veto will then be followed by an attempt in both chambers to override, which almost certainly will fail. That means there will be additional weeks of angry debates, symbolic votes and finger-pointing.

But those won’t be the only budget-related events happening. Fiscal 2011 ends Sept. 30 and, given the current state of the fiscal 2012 appropriations debate, that almost certainly means a government shutdown will be threatened over the funding level for a continuing resolution.

Yes, the debt ceiling deal includes spending caps that, in theory, should make a CR easier to enact. But, especially in the House, a cap will be taken by some as just an upper limit rather than an agreed-upon amount that doesn’t require any further changes. As a result, the CR debate will be neither quick nor simple, with tea partyers pushing for spending reductions for fiscal 2012 beyond those in the deal.

What could make matters worse is that the CR might not — or probably won’t — be for a full year. Less than 24 hours after the debt ceiling agreement was announced, the GOP leadership apparently was using the prospect of a series of short-term continuing resolutions with additional spending cuts on each as one of the inducements to convince tea partyers to vote for the debt ceiling deal.

The newly created Joint Committee on Deficit Reduction will be meeting while all this is happening. House committees have an Oct. 14 deadline for sending their deficit reduction preferences to the committee, so they also will be very active in September.

As the coverage of what each committee is recommending and the inevitable leaks of what is being considered by the committee are reported, the short-term continuing resolutions could be used to increase pressure on what is, and is not, being considered. There could well be a series of one-month CRs and, therefore, a virtually constant threat of a shutdown.

The joint committee is supposed to report its recommended $1.5 trillion deficit reduction plan by Nov. 23, and Congress  will either approve it by Christmas or trigger a “sequester” — an across-the-board spending cut.

Tied to what the committee does will be the increase in the debt ceiling of $1.2 trillion to $1.5 trillion that will be needed at that point. Once again, the requested increase will be subject to a disapproval vote, a veto and possibly an attempt to override. All of this somehow is supposed to happen by Christmas 2011.

Assuming that a full-year continuing resolution has been enacted at that point, this will lead directly to the start of the next budget debate. Lest anyone forget, President Barack Obama’s fiscal 2013 budget is required to be submitted to Congress by Feb. 6. The joint committee will be gone, but all attention at that point will turn to the prospect for continuing the tax cuts that are set to expire at the end of the year.

The important thing to note is that the continuing pandemonium over the budget isn’t going away anytime soon just because the increase in the federal debt ceiling has been settled in some way. In fact, just the opposite is true.

If the agreement isn’t enacted, the uproar will be constant but mostly improvised. If the agreement is enacted it will be more scheduled. Either way, it’s going to happen.

How the super-committee works

Is the super-committee required to be unanimous in its recommendation, or is a recommendation possible even if not all members agree?

Majority vote. Split 6

Majority vote. Split 6 Democrats to 6 Republicans, that means either compromise, defection or failure. What am I saying? That means either defection or failure.

That is the most depressing

That is the most depressing thing I have read all week.

Well, your Wall Street

Well, your Wall Street friends said the market would plop if there were no deal; today there was a deal and the market plopped anyway. Course, even Mr. Market could see this was a bad deal, that will make the weak "recovery" sputter. Makes holding just about anything except stocks look good.

Why expect agreement

Look at the two biggest "no" groups:

Tea Party conservatives are appalled at the debt and, since they believe in limited government are focused on reducing expenditures. They are against increasing taxes as they (rightfully) believe that it will encourage more spending. In their view the cuts were way too small, and timed to occur too late.

Liberals, including the Congressional Black Caucus believe strongly that entitlements and spending are essential support for our most vulnerable. They (rightfully) believe cuts disproportionally affect the most vulnerable of us. They focus on the wealth disparity and believe strongly we should tax the rich to solve our problems.

An interesting exercise would be to increase all taxes 5% across the board, and to make a similar 5% cut on all expenditures (Discressionary spending, Defence, SSI, Medicare, Medicaid. The budget would still not balance, but it would be an improvement. Perhaps the R's could shape the tax changes and the D's could shape the spending changes, but the targets must be met. Ahh fantasy.

On second thought we will never agree!

Is Obama completely

Is Obama completely delusional when he says that now that this is "over", we will be "pivoting" to the issue of stimulating job growth? Or is he conscioualy lying? I don't which is more frightening: that he genuinely doesn't realize all the obvious things you explained very clearly in this post, or that he is a brazen liar.

Liars Poker

The $971B represents reductions from the stream of fictional plans and is from each years' "then year" estimate.

That makes the reduction a very slight reduction to growth of the spending, nothing real or meaningful.

So, in 2013 when the deficit is worse because the economy is tanked by the still wretched capitalization of banks which should be liquidated, the excuse will be only SS can give the cuts.

The debt ceiling agreement reduces the growth of corporate welfare from 6% annual to 5%, and nothing more.

It is a massive con.

Work in transportation and do

Work in transportation and do not consider myself a liberal by any means. That said, for those of you who think these cuts won't be problematic in the long run, well, I can't help you. On a state level, we've already taken a huge funding hit. Now on a federal level, we're taking another (the stimulus was important to transportation, but that is gone now). Moreover, everyone is deeply worried about the new transportation appropriations being drafted in the House. Another decade of competing with other states over an ever shrinking maintenance budget and this country is not going to be the same.

Honestly, we're making a religion of screaming over "waste," while slowly drowning what we need to be successful. This is not to say every project is just or right, it's just to say that I feel like I am slowly witnessing what happens when a country begins to decouple from the infrastructure that makes it whole. It's quite disconcerting.

A simple spelling change

I feel like I am slowly witnessing what happens when a country begins to decouple from the infrastructure that makes it whole. It's quite disconcerting.

From the United States to the Untied States.

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