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What's Now Happening On Federal Budget is Worse Than The Fiscal Cliff

07 Feb 2013
Posted by Stan Collender

When I was much younger, I helped start a monthly breakfast meeting for a handful of inside-the-beltway budget wonks.

The group has gotten considerably larger over the past three decades and its makeup – Democrats and Republicans, former House and Senate staffers, former executive and legislative branch officials, conservatives and liberals -- has changed quite a bit from its five original members. But 30 years after it started, the group continues to get together each month to share thoughts, experience, research and lots of snarky comments. When it meets, as it did this week, there’s more than 600 years of federal budget expertise sitting around the table and the discussion is one that couldn’t happen most other places. For me, it’s a reality check and a source of information and inspiration.
This month’s budget breakfast group meeting was even more extraordinary than usual for one reason: The same people who typically analyze what’s ahead on the budget with remarkable precision months before it happens all basically admitted that the current situation is as complex, hard to read, and even harder to predict than any they’ve ever seen.
Here are the moving pieces.
The Sequester. If you followed the fiscal cliff you know that the sequester – the across-the-board spending cuts that were triggered when the anything-but-super committee failed in November 2011 to agree on a deficit reduction plan -- was delayed until March 1. Because it’s already February 7, you also know that the sequester’s now $85 billion in military and domestic program reductions are only about three weeks away.
That’s the simple part. What complicates this greatly is that, while no one says they want these particular spending cuts to go into effect, every alternative seems to be much less desirable politically that the sequester reductions.
This week’s proposal from the White House to delay the sequester and substitute a combination of revenue increases and other spending cuts in the meantime was rejected by House and Senate Republicans almost instantly. A Senate Republican preference to substitute more domestic reductions for the military cuts is a nonstarter with Senate Democrats. And the House Republican preference to substitute Medicare and Medicaid changes for the sequester reductions has been rejected by House and Senate Democrats.
A backup plan being discussed by Senate Republicans that would keep the sequester in place but give the departments and agencies flexibility in how they may be achieved is just as confusing but for a very different reason. The flexibility the Senate GOP wants is not acceptable to House Republicans because they’re afraid that the Obama administration will use the flexibility to cut programs, projects, and activities in Republican-held districts while adding funds in those represented by Democrats.
Meanwhile, the word from the White House is that it doesn't want the flexibility the Senate GOP wants to provide because that could leave it open to criticism from those whose programs are cut rather than saved. The administration’s reasoning apparently is that the very strict sequester spending cut formula will mean that it cannot be blamed for the results if sequestration happens.
In other words, the sequester -- the deficit reduction alternative that was supposed to be so dastardly that Democrats and Republicans alike would do everything possible to avoid it – actually has become what’s most likely to happen.
The 2014 Budget. The “No Budget No Pay” provisions of the debt ceiling bill mean that the House and Senate have to adopt their own versions of a fiscal 2014 budget resolution by April 15. But…The Senate isn’t scheduled to be in session from March 25 to April 7. With two of the remaining days before the 15th coming over a weekend, the Senate will need to get its work started earlier in the month to avoid having the pay of each senator withheld.
Because of the rules created in the Congressional Budget Act, the debate on the budget resolution usually takes about a full week to complete. Therefore, the Senate will really need to begin the floor debate on the budget resolution the week of March 18 and the budget committee will need to start its markup at least a few days, if not a whole week, before then.
All of this will be complicated by the fact that the Obama administration’s fiscal 2014 budget, which was required to be sent to Congress by February 4 but has been delayed by the election and fiscal cliff, is now is not expected to be released until the middle of March. And, of course, the sequester may go into effect on March 1, although the impact of the spending cuts might not be felt by the time the Senate Budget Committee begins to draft a budget.
Under these circumstances, it’s going to be harder than usual for Congress to figure out baselines, economic forecasts and all of the other basic information it needs not just to draft a budget resolution but to evaluate what’s being debated.
Government Shutdown. If the almost certain confusion surrounding the sequester and budget resolution isn’t enough, the existing continuing resolution expires on March 27 and the federal government could shutdown the next day if funding isn’t extended in some way. Needless to say, the sequester and budget resolution debates in the House and Senate greatly complicate this because the new CR could restore some or all of the cuts put in place on March 1, could provide departments and agencies with flexibility, could cancel the sequester entirely or could cut spending further.
And the debate on the CR could be happening at the same time the Senate is debating its budget resolution. That could mean that the budget resolution debate has to stop and the CR debate needs to begin. This means that the budget resolution debate should begin in the Senate even earlier in March.
All of this makes what happens in March impossible to predict. There will be four major budget events: the sequester on March 1, the release of president’s budget around March 15, the start of the consideration of the budget resolution around the same time the president’s budget is released and the expiration of the continuing resolution on March 27. Each of these will have an impact on the others, and each one could be used in some way to mitigate what happens, or doesn't happen, earlier.
It’s also possible that everything will be put on hold for several months, that is, the sequester will be delayed and the CR extended until, say, May 30. At that point the House and Senate likely will both have passed fiscal 2014 budget resolutions and, at least in theory, could be close to having an agreed-upon plan in place. Or they won’t be able to agree on anything even though at that point another shutdown and debt ceiling increase will be looming.
The only good news in all of this is that my budget breakfast group wil have a great deal to talk about.

The “No Budget No Pay” provisions

This is (sadly) a typical political sham. All that is happening is that Congressional pay will be put in escrow until they finally pass a budget and then they get it all - i.e. no net fiscal implications.

English correction?

I believe this is the most perilous time for our economy in my lifetime and I am over 60. I was curious though, shouldn't it read,"Than the sequester," rather than, "That the sequester," in the post.

no budget, no pay question

Does "no budget, no pay" require a FY14 budget resolution or would a FY13 resolution suffice? The Senate hasn't passed the latter, AFAIK.

There is zero chance that the

There is zero chance that the defense sequestration will occur. Dems don't want it; Repubs don't want it; Obama doesn't want it. The only question is how they will arrive at that outcome.

What seems most likely to me

I think they'll let the sequester go through and then quickly send several bills up to increase defense spending, etc.

Senior Centers

I am a Director of a Rural Senior Center, we provide Home Delivered Meals, Congregate Meals and Information and Assistance, what does this mean for our funding, We are in Illinois and as we all know our state is in quit a mess. My funding has been cut to where we are receiving 1/4 of our monies, this is not enough to keep our doors open. My concern is for my clients, what do they have to look forward in the upcoming months? My clients depend on these programs.

What the !@$#?

Seriously? The entire economic situation would be resolved in three months if the Senate, House, and President gave their powers to academic scientists in the social, economic, and physical sciences. It would be simply a matter of optimization and measurement, and the whole matter would be done with. No hard feelings, no weird agendas, just one gigantic optimization with long-term economic and social health as priority.

When I decided to invest summer earnings in the stocks this winter, I did not forsee that there would not be enough brains and balls in politics to figure out what is right in a logical way. Instead, I see a bunch of intellectually deprived !@#!@#$s literally running an ideological crusade.

Fiscal Cliff

I am so sick and tired of these egomaniacs that are in government. They are so worried about getting reelected instead of worrying about their constituants and how this will affect them. More worried who's going to be right and who's going to get credit for their decision. Please, please, vote these high school children out of office. They have NO idea what the real world is feeling. Please get them out because we certainly can't do any worse with some "green" politicians who may actually have some good ideas! I HATE politics and this feeling isn't new....I'm 74 years old and sick of it!!!!

It's clear that we just have

It's clear that we just have to cut up all the federal government's credit cards. They are on a binge that is bankrupting all of us. They need to be shut down, if necessary, so that they understand reality. The rest of us have been suffering since 2007, and are tired of subsidizing all this.

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