No Budget Resolution at Hand, But Some See Mixing FY 2014 Funding With Debt Limit Hike

October 3, 2013 08:07 AM
 

Via a special arrangement with Informa Economics, Inc.


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Impacts of shutdown continue.

There was no resolution on budget issues that arose from the late-Wednesday White House meeting, but the situation seems edging closer to be folded into the debt-limit hike situation. And lawmakers are pledging to make sure that furloughed workers will get paid once the shutdown is over.

No budget resolution after White House meeting between Obama, lawmakers. The late-afternoon session Wednesday between President Obama and House and Senate leaders at the White House was labeled "cordial but unproductive" by Senate Minority Leader Mitch McConnell (R-Ky.), with House Speaker John Boehner (R-Ohio) saying Obama again signaled he would not negotiate. Republicans, meanwhile, continued to insist on changes to ObamaCare to which Senate Majority Leader Harry Reid (D-Nev.) said was an area where Democrats and the White House are "locked in tight." Reid said he told Boehner that the Senate would go to conference with the House, but on a broad budget agreement, not a short-term continuing resolution. Reid said the budget conference would be the appropriate place to address a range of fiscal issues including a tax overhaul, agriculture, health care and discretionary spending. Boehner spokesman Michael Steel immediately rejected Reid's proposal. "The entire government is shut down right now because Washington Democrats refuse to even talk about fairness for all Americans under ObamaCare. Offering to negotiate only after Democrats get everything they want is not much of an offer," Steel said.The session largely leaves things at a standstill in terms of getting the government reopened with neither side appearing to be willing to give.

Impacts of shutdown continue. The ongoing government shutdown will mean more data will not be released by the government, including the Weekly Export Sales report. However, Weekly Jobless Claims data was issued as states compile most of the data. Meanwhile, the shutdown is focusing attention on USDA's Women, Infants and Children, or WIC program, a $7 billion effort administered by states that serves about 8.7 million low-income women and children and has to get by on $125 million in contingency funds and whatever cash states have on hand until the government reopens. About half the states are thought to have enough money to keep the program running for another two weeks. California's $1.1 billion program, the nation's biggest, can continue for another month. However, WIC offices in Arkansas and Utah have reportedly already begun turning new clients away.

House Budget Chairman Ryan signals possible strategy ahead. In a press conference Tuesday, House Budget Chairman Paul D. Ryan (R-Wis.) said he expects the debt limit to be "the forcing action to bring us, the two parties, together... We want a budget agreement that gets the debt under control, we want to grow the economy, and that's what we're here to do," Ryan said. He added that Republicans are seeking a "budget agreement that pays down our debt, that has pro-growth economic policies to create jobs, to make sure that we can deal with the sequester." Ryan and other Republicans focused on budget issues believe that Democrats are so unhappy with the sequester - the spending reductions imposed by the 2011 Budget Control Act and enforced by automatic, across-the-board spending cuts - that they will want to strike a larger deal cutting entitlement spending in return. They believe the need to raise the debt limit as well as the sequester give them leverage to strike such an agreement, since many Democrats have made sequester relief a priority. Both sides are locked in on fiscal fundamentals: GOP leaders insist they will not vote for another tax increase and Democratic leaders' demand that new revenue be generated by closing tax breaks in return for changes to entitlement programs such as Medicare, Medicaid and Social Security. Still, some say a deal could emerge that includes limited restructuring of entitlement programs, revenue in the form of fee increases or something similar and initiatives aimed at promoting economic growth such as a tax overhaul, according to sources close to GOP leadership.

Lawmakers seek to ensure back pay for furloughed federal workers. Lawmakers whose districts include many federal employees are pushing to ensure that furloughed government workers receive back pay for the duration of the shutdown. The move is a pre-emptive attempt to forestall any argument over back pay as a standoff in Congress extended a government shutdown for a second day.

Comments: The shutdown situation continues to dominate the focus in Washington but there's been little movement to resolve the dispute that keeps the government in partial shutdown mode. Now with the focus starting to shift to the debt-limit situation, that's when markets will really start to let lawmakers know if they push the issue close to a default. However, House Speaker John Boehner is now pledging that the government will not default. That assurance may ring hollow after the shutdown.

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