November 28, 2014

Washington Budget Report: December 10, 2013

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Once Again, Congress Reluctant to Pursue Big Reforms

Congressional negotiators are reportedly moving towards a limited budget agreement that would avoid another government shutdown but generally fails to pursue substantial fiscal reforms.

A budget conference committee was given until this Friday to come up with a belated compromise plan to fund the government in Fiscal 2014, which began Oct. 1. Hopes have focused largely on private talks between House Budget Committee Chair Paul Ryan (R-Wis.) and Senate Budget Committee Chair Patty Murray (D-Wash.).

While details remained uncertain early this week, the developing deal would reportedly raise the sequester-level discretionary spending caps for two years and offset the increase with fee hikes, broadcast spectrum auctions and higher contributions from federal workers to their retirement plans.

This agreement would allow the appropriations process to go forward in a more regular manner than in the crisis environment of recent years. But it would simply kick many critical issues – from revamping the tax code to reforming the entitlement programs – down the road.

In addition, the plan would not curb the projected growth of the federal debt or address the need to raise the statutory debt limit by early next year.

“That this can be declared a victory is an indicator of how low the process has sunk," Robert L. Bixby, executive director of The Concord Coalition, told The Washington Post. "They haven’t really done anything except avoid another crisis.”

Even this low bar may prove to be too high as some lawmakers in both parties have registered objections to certain parts of the reported deal.

Properly Financed, Jobless Aid Can Boost Economy

Extending emergency unemployment compensation for another year would add 200,000 jobs to the economy but would carry a one-year price tag of $25 billion, according to a new analysis by the Congressional Budget Office (CBO).

Democrats and Republicans this week continued to argue over extending the aid, with both sides citing last Friday’s jobs report as support for their positions on passing an extension of the emergency assistance.

The Bureau of Labor Statistics said the overall unemployment rate dropped to 7 percent. However, 37 percent of the unemployed have been without a job for more than six months. Democrats say the jobs report shows that many of the long-term unemployed are still struggling and need help. But Republicans say the dropping unemployment rate shows that emergency benefits are no longer needed.

Unemployment compensation provides an immediate surge in economic activity as recipients quickly spend their benefits on consumer goods and services, boosting aggregate demand. If the program expires at the end of the month, 1.3 million workers will immediately lose emergency benefits.

Emergency unemployment compensation is one of the more effective forms of fiscal stimulus, but its cost should ideally be offset with a plan that reduces deficits over the long-term.

Conference Speakers Urge Long-Term Perspective

Former Senate Budget Chair Kent Conrad (D-N.D.) addresses the audience at the Conference on Fiscal Responsibility

In addition to making short-term budget decisions, elected officials must do a better job than they have this year in confronting the nation’s larger, long-term fiscal challenges.

Budget experts, lawmakers and former members of Congress expressed that theme as they discussed how to avoid future fiscal crises at a conference last week on Capitol Hill. The event was organized by the University of New Hampshire’s Warren B. Rudman Center and The Concord Coalition in cooperation with several other organizations.

Although the federal deficit has dropped sharply in the past year, the keynote speaker at the conference – former Senate Budget Committee Chairman Kent Conrad – warned that much remains to be done: “The dirty little secret is that our long-term situation has not improved dramatically.”

Congressional Budget Office Director Doug Elmendorf said higher spending in just a few key programs, including Social Security and Medicare, is expected to outweigh additional expected revenue and projected cuts in other spending.

In videotaped remarks, New Hampshire’s U.S. senators – Democrat Jeanne Shaheen and Republican Kelly Ayotte – both stressed the need for bipartisan cooperation.