StanCollender'sCapitalGainsandGames Washington, Wall Street and Everything in Between



5 Budget Predictions For 2014

26 Dec 2013
Posted by Stan Collender

This is the week when the-year-in-review stories start to be published.

I've always found those recaps to be largely irrelevant. If something significant happened this past year you likely already know or remember it without it being included on a top 10 list. And if you don't remember could it really have been that noteworthy?

Besides, when it comes to the federal budget, nothing that happened -- including the much-ballyhooed-but-actually-totally-inconsequential end-of-year deal -- was so important that it merits further discussion.

My overwhelming preference is to look at what's ahead rather than at what's already occurred. With that in mind, here are my top five budget predictions for 2014.

1. The deficit will be much lower than projected. Next year will be when the deficit is widely recognized as not being a short-term economic problem. With the rate of economic growth increasing and no substantial increases in spending or decreases in revenues likely to be enacted, the federal deficit will be closer to 3 than 4 percent of GDP. Expect Senate Budget Committee Chairwoman Patty Murray (D-WA) to take every opportunity to have a high-profile economist testify at a hearing that the deficit is not something of immediate concern.

2. The debt ceiling will be a bigger deal than anyone currently is assuming. If the debt rather than the deficit is the biggest budget issue of 2014 (see #1), the legislation needed to deal with it will be a tougher fight than the current common wisdom in Washington wants us to believe. Yes, it's irrational for congressional Republicans to want another knockdown fight over a budget issue after they were so politically damaged during the shutdown. But the debt is an emotional rather than a rational issue and the debt ceiling legislation may well be the only big budget bill on which they can make a stand.

The fact that the Treasury now says the debt ceiling will have to be dealt with by the end of March makes a fight of some kind more likely because there will be time for the memory of that to fade before voters go to the polls. By contrast, the late-May/early June timetable that some thought might be most likely would have left only four months before October campaigning.

3. The budget battles will continue but go underground. Contrary to popular belief, the budget deal developed by Murray and House Budget Committee Chairman Paul Ryan (R-WI) did not remove the threat of a shutdown. That can only be done with appropriations and they still have to be enacted by January 15 to prevent the government from shutting its doors and gates again.

As I posted previously, the fight over either the individual appropriations or (much more likely) an omnibus appropriation in January won't be over the topline because the deal set an overall spending ceiling. Instead, it will be over how much gets appropriated for individual programs and parts of programs, and those fights typically are largely hidden from public view. That will be the case next year unless funding for some popular programs are proposed to be deeply cut or completely eliminated.

The underground battles will be especially the case if funding for the rest of fiscal 2014 and all of 2015 is done with an omnibus bill. In that case, even the largest of the fights will be behind the scenes and difficult to follow.

4. No tax reform. There's not enough consensus as 2014 gets underway on what to do and not enough time before the election to develop it. Plus, the chairmen of the tax-writing committees in the House and Senate are both lame ducks and those who will likely replace them will want tax reform to happen on their watch rather than before they get the job.

5. Another budget process commission. Congress typically focuses on the budget process when it isn't able to do something about the budget itself. That makes 2014 the perfect time to set up what some budget process geeks have been suggesting for years: a new commission like the President's Commission on Budget Concepts that in 1967 created most of the concepts -- like having the budget include Social Security -- we still use today.

A commission like this most likely would not be allowed to report until after the 2014 election so that its recommendations would have little impact on the outcome. In the meantime, the high-profile appointees the GOP and Democrats name will give both political parties talking points for the campaign.

Depression

Gee, Stan -- you couldn't depress us more going into New Year's??!! But thank you for the analysis. It's very useful.


2014 economy condition may

2014 economy condition may not be so well. But I hope for the best, I pray to Almighty for the best we can see.

  • These pokies online have got a position for each and every variety of game enthusiasts.

Long term...

Long term, passing this budget with no attempt to control costs I would expect to cause a serious drag on the economy. I realize all politicians concern themselves with is the next election, but this was a bad deal for the future of the country.




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