April 24, 2014

Washington Budget Report: Dec. 11, 2012

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Negotiations Continue Over Fiscal Cliff, Budget Reform

Negotiations over the year-end “fiscal cliff” and federal budget reform continued early this week, with President Obama and House Speaker John Boehner meeting Sunday afternoon but offering the public no details of the discussion.

In the last two weeks the administration and House Republican leaders have exchanged formal proposals, with each side complaining that the other was recycling old and unbalanced proposals. The White House and Boehner’s office, however, have said the “lines of communication remain open.”

Many economists and others say the fiscal cliff – a combination of expiring tax breaks and poorly designed “automatic” spending cuts –  could put the country back in a recession if these policies are all allowed to take effect as currently scheduled.

On Sunday Christine Lagarde, the managing director of the International Monetary Fund, added her voice to these warnings. She said the possible failure of Washington’s fiscal negotiations was the most significant threat facing the U.S. economy and could result in “zero growth.” She called for a balanced agreement in Washington that would include both spending cuts and revenue increases.

The Concord Coalition urges elected officials in both parties to work together to quickly replace the cliff with an immediate but more responsible “down payment” on deficit reduction, together with a framework for more comprehensive, long-term budget reform.

Ideally, the two parties will also find a way to avoid another protracted battle over the federal debt limit, which will need to be raised in the near future. A willingness to compromise is essential for both sides, since neither party has the ability to force through its own agenda.

Obama Seeks $60.4 Billion for Sandy Recovery

The White House has formally requested $60.4 billion in federal funding for recovery from the damage caused by Hurricane Sandy. Acting OMB Director Jeffrey D. Zients wrote that the funding will “include efforts to repair damage to homes and public infrastructure and to help affected communities prepare for future storms.”

According to the White House, “current projections are that Sandy is on track to be the second or third most costly natural disaster in U.S. history, behind Hurricane Katrina (2005) and close to
Hurricane Andrew (1992).”

The administration requested that the funding be provided without offsets, under provisions in the Budget Control Act that exclude emergency spending and some disaster relief funding from the law’s caps on discretionary spending. Emergency spending has traditionally been excluded from budget allocations and other budget enforcement mechanisms.

Among the priorities in the request are the Community Development Block Grant program, the Federal Emergency Management Agency’s response and recovery efforts, the National Flood Insurance Program, repairs to transportation infrastructure, and Federal Transit Administration and Army Corps of Engineers programs to reduce the risk of future flooding and damage to transportation systems.

House Appropriations Committee Chairman Harold Rogers said that his committee would “consider the White House request for recovery assistance very thoroughly, with an eye toward prioritizing urgently needed recovery efforts that will have the most benefit to the victims of this storm, and determining the federal role in these efforts.”

Senate Appropriations Homeland Security Subcommittee Chair Mary Landrieu said, “It is critical for Congress to pass a supplemental before the end of this year that includes resources for mitigating the impact of future disasters and provides necessary flexibility for a strong, efficient recovery.”

It is important that the Sandy relief efforts be adequately funded without unnecessary delays.  However, Congress should resist the temptation to add any extraneous items that are not emergencies and would normally be considered through the regular appropriations process.  

Lawmakers Sign Bipartisan Call for Deficit-Reduction Plan

Dozens of lawmakers in both parties have signed a letter to congressional leaders that says a bipartisan agreement to avoid the fiscal cliff should include “a long-term, comprehensive deficit reduction plan.”

Leading the effort are Representatives Jim Cooper (D-Tenn.), Steven LaTourette (R-Ohio), Heath Shuler (D-N.C.) and Mike Simpson (R-Idaho). The group also put together a meeting last Wednesday with members of the Fix the Debt campaign, including Alan Simpson and Erskine Bowles, who co-chaired the National Commission on Fiscal Responsibility and Reform.

As of early this week, according to Cooper's office, about 77 members of Congress had signed the letter.

“To succeed, all options for mandatory and discretionary spending and revenues must be on the table,” the letter says. “ We also know from other bipartisan frameworks that savings from all parts of the budget and real reform of the tax system will be necessary to stabilize our debt as a share of the economy and assure America’s fiscal and economic well-being over the long term.”

Cooper,  LaTourette, Shuler and Simpson were among the 38 lawmakers who received The Concord Coalition’s 2012 Paul E. Tsongas Economic Patriot Award for their support of legislation earlier this year that would have followed through on recommendations from a majority of the Simpson-Bowles commission.