Update on Key Sequester, Other Budget-related Issues

February 26, 2013 11:49 PM
 
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via a special arrangement with Informa Economics, Inc.

White House issues spending fixes report | House GOP stopgap spending plan | Senate GOP splits on sequester | Bernanke urges deal | Obama rejects one Senate proposal

NOTE: This column is copyrighted material, therefore reproduction or retransmission is prohibited under U.S. copyright laws.


The following are updates on several ongoing budget-related issues...


Obama admin. details spending fixes. The Obama administration has an extensive list of spending changes it wants attached to stopgap funding legislation that could be on the House floor next week. The 35-page list of the funding changes, known as anomalies, is being proposed by the Office of Management and Budget (OMB) for a measure funding the final six months of Fiscal 2013. OMB usually seeks anomalies in stopgap funding measures to give agencies some flexibility in their spending, which otherwise would match the prior fiscal year’s numbers. The changes would be attached to legislation replacing the current six-month continuing resolution that expires on March 27. House GOP leaders say they will take up the measure next week. It is unclear which of the anomalies are included in the House CR.

Among the anomalies requested is language to make sure that the Supplemental Nutrition Assistance Program (food stamps) will continue to make payments “in a timely manner.” It also has language dealing with Section 32 funding.


House GOP stopgap spending measure being drafted. House Appropriations Chairman Harold Rogers (R-Ky.) is drafting a stopgap that would combine new Fiscal 2013 Defense and Military Construction-Veterans Affairs appropriations bills with a six-month CR for most of the rest of the federal government. The legislation will take into account the $85 billion sequester due to take effect. The GOP proposal would echo current budget laws: a cap of $1.043 trillion on discretionary spending for Fiscal 2013, with the sequester reducing it down to about $972 billion. The Senate’s top appropriator, Barbara Mukluk (D-Md.),said the proposal offered by Rogers is “not sufficient for the Democratic caucus.”


Senate Republicans split about sequester approach. A difference among Senate Republicans over what to propose as a substitute for the sequester has made it more difficult for expected Senate votes this week on competing GOP and Democratic deficit-reduction proposals. The competing proposals were to be considered under an agreement requiring 60 votes for passage, meaning both are virtually certain to be defeated. Democrats support a $110 billion proposal (S 388) to replace the automatic cuts with a package – about half of the $110 billion in revenue the plan would raise would come from requiring taxpayers with a gross adjusted income of $4 million or more to pay a 30 percent tax – the new tax would be phased in beginning at $1 million and reaching the full 30 percent at the $5 million level. The other half would be achieved by cutting direct payments to farmers and instituting cuts to defense programs beginning in 2017. The legislation also denies tax deductions for certain outsourcing expenses by corporations. One GOP proposal would provide federal agencies more flexibility to implement the cuts, but that approach worries some Republicans who fear the White House would use the measure to circumvent congressional budgeting authority.


President Obama rejected the idea that giving agencies flexibility in implementing spending cuts would make them less damaging. “The problem is when you're cutting $85 billion in seven months, which represents over a 10 percent cut in the defense budget in seven months, there's no smart way to do that,” the president said. Instead of cutting out the government spending that is not needed, such as wasteful programs, special interest tax loopholes, and tax breaks, the sequester uses a “meat cleaver approach” that would gut critical investments such as education, national security, and medical research, the president said. “There are too many Republicans in Congress right now who refuse to compromise even an inch when it comes to closing tax loopholes and special interest tax breaks. And that's what's holding things up right now,” Obama said.


The House is not scheduled to be in session March 1, the day the sequester cuts are scheduled to begin. But House Speaker John Boehner (R-Ohio) said that did not mean the House could not act on a Senate fix, should that chamber pass one. “If the Senate acts, I'm sure the House will be prepared to move quickly,” Boehner said.


Fed Chairman Bernanke urges Congress to deal with sequester. Federal Reserve Chairman Ben Bernanke told a Senate panel on Tuesday that Congress is placing a “significant” burden on the economy with the sequester. He urged lawmakers to replace the cuts with more measured long-term deficit reduction. Bernanke noted a Congressional Budget Office (CBO) estimate that the sequester would reduce economic growth by 0.6 percent this year, and result in the loss of 750,000 jobs by the fourth quarter. Bernanke said those estimates are similar to the Fed's calculations. “To address both the near- and longer-term issues, the Congress and the administration should consider replacing the sharp, front-loaded spending cuts required by the sequestration with policies that reduce the federal deficit more gradually in the near term but more substantially in the longer run,” Bernanke said. He said providing flexibility for administering the cuts, as Republicans propose, might improve the policy ramifications, but that the economy would still suffer. Bernanke warned that the lower spending forced by the sequester will threaten an already challenged economic expansion. “Given the still moderate underlying pace of economic growth, this additional near-term burden on the recovery is significant,” Bernanke told the Senate Banking Committee. “Moreover, besides having adverse effects on jobs and incomes, a slower recovery would lead to less actual deficit reduction in the short run for any given set of fiscal actions.”



NOTE: This column is copyrighted material, therefore reproduction or retransmission is prohibited under U.S. copyright laws.


 


 

 

 

 

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