July 25, 2014

Washington Budget Report: August 7, 2012

« Back to WBR Issue List

Sign Up to receive the Washington Budget Report »


Deal Could Avert Shutdown, Delay Difficult Choices

Before leaving for the August recess, Speaker of the House John Boehner (R-Ohio) and Senate Majority Leader Harry Reid (D-Nev.) announced an agreement on a six-month continuing resolution (CR) to fund the government through March at a level consistent with the $1.047 trillion cap included in last year’s Budget Control Act (BCA).

Boehner said that congressional staff will write the legislative language over the August recess so the House and Senate can consider it in September. Reid said that the agreement “will provide stability for the coming months“ and White House Press Secretary Jay Carney called it “a welcome development.”

If enacted in September, the CR would avert a government shutdown while delaying difficult choices on spending until after the election. The CR is necessary because Congress has yet to complete any of the 12 appropriations bills necessary to fund the government in the fiscal year that begins in October.

A dispute over the overall funding allocation for the bills has delayed them. The President and Senate Democrats supported the levels in the BCA while House Republicans had proposed cutting spending below those levels.

It is somewhat encouraging that the agreement could avert a government shutdown. However, it is disappointing that Congress has once again ducked the difficult choices.   

Funding government agencies through a CR places most programs on automatic pilot and reduces opportunities for trade-offs such as cutting ineffective programs and adding funds for effective ones. These decisions should be at the heart of a fiscally responsible budget process. A return to the traditional budget process that includes a budget resolution and timely approval of individual appropriations bills is long overdue.

House Approves Extension of Bush Tax Cuts

House Republicans last week approved a one-year extension of the Bush-era tax cuts after rejecting a Democratic proposal to limit the extension to family incomes below $250,000 a year.
The Republican plan was approved on a 256-171 vote, mostly along party lines.

Last week the Senate approved the Democratic proposal. The votes underscored the unwillingness of the two parties to cooperate ahead of the November election.

Under both parties’ proposals, federal revenues would fall and deficits would increase relative to current law, which calls for all of the Bush-era tax cuts to expire at the end of this year. Extending them all for a year would cost the government $179 billion in lost revenue, $32 billion more than if the extension were limited to family incomes under $250,000, according to the Joint Committee on Taxation.

Under either proposal, income below the threshold would be taxed at the lower rates -- even for taxpayers with total incomes above the threshold.

The administration and the Congressional Budget Office (CBO) say permanently extending all of these cuts would cost the government around $2.8 trillion over 10 years relative to the current-law baseline. Restricting the extension to family incomes under $250,000 would limit the government’s loss over that period to $2 trillion.

The 2001 and 2003 tax cuts are not the only expiring tax cuts to worry about. CBO estimates that extending relief from the Alternative Minimum Tax (AMT) would, together with the Bush-era cuts, cost the government more than $4.5 trillion over the next decade -- not including additional interest costs. Adding about 80 other expiring tax provisions would bring to the cost -- still not including interest -- to $5.4 trillion over 10 years.

On Thursday the Senate Finance Committee approved a $205 billion measure that would continue dozens of tax breaks that are scheduled to expire soon. It includes an AMT “patch” to protect moderate incomes and would extend credits for renewable energy and for research and development.

LaTourette’s Efforts for Bipartisan Reform

Rep. Steven LaTourette, an Ohio Republican who has helped lead congressional efforts to build on the work of the bipartisan Simpson-Bowles fiscal commission, last week announced he would not seek re-election.

While he plans to continue pushing for fiscal reform for the rest of his term, he expressed frustration that many people on both the right and the left have come to view compromise as cowardice.

Such concerns have also been voiced by many other moderates in Washington. Steve Winn, communications director for The Concord Coalition, writes in a recent blog post that this frustration “should serve as a warning to American voters that partisanship and political intransigence are clouding the country’s future.”

LaTourette deserves high praise for the broad, bipartisan budget plan he introduced earlier this year with Rep. Jim Cooper (D-Tenn.) Concord is honoring LaTourette, Cooper and 36 other House members from both parties for their courageous support of the plan. Cooper and LaTourette will accept the 2012 Paul E. Tsongas Economic Patriot Award on behalf of all of the honorees at a Washington dinner marking Concord’s 20th anniversary next month.

LaTourette and three other supporters of the Cooper-LaTourette legislation -- Robert Dold (R-Ill.), Daniel Lipinski (D-Ill.) and Charles Bass (R-N.H.) -- held a press conference last week to call for bipartisan cooperation in dealing with budget decisions that need to be made this year.

Facing the Facts on the Debt and Other Key Issues

The Concord Coalition is partnering with “Face the Facts USA,” a nonpartisan project of the George Washington University School of Media and Public Affairs to provide the public with key facts between now and the election. The project also includes infographics and video content.

As Concord Policy Director Joshua Gordon explains in a new blog post, two debt-related facts have already been featured. Future material will include information on issues such as taxes, health care, Social Security and Medicare.