Tag: Congressional Budget Office

As sequesters go, I thought this one was pretty smooth

Notwithstanding the dire warnings from everybody in Washington who said they didn’t want it to happen, but who let it happen anyway, the automatic budget cuts of the sequestration went into effect over the weekend.  No big deal?  Sure doesn’t seem like it, does it, at least not yet; but Slate has a good FAQs on this for those who want to keep an eye out for the signs of the apocalypse:

Can you start with the basics, like what the heck is the “sequester” and where did it come from?

In short, a sequester is a formal term for mandatory cuts to the federal budget. This particular sequester was originally created back in 2011 when lawmakers struck an eleventh-hour debt-ceiling compromise. In theory, the mere possibility of those cuts was supposed to ensure that Congress’s so-called supercommittee would have no other choice but to strike a deal to trim the federal budget by $1.5 trillion over the next decade. Notice we said in theory. In reality, the panel failed to live up to its super name, and so began the slow march toward today.

(snip)

…a trillion dollars? That sounds like a lot.

It is, but it doesn’t happen all at once. The cuts are actually spread out over the next decade. This year’s sequester includes: $42.7 billion in defense cuts (or about an 8 percent reduction); $28.7 billion in domestic discretionary cuts (5 percent); $9.9 billion in Medicare cuts (2 percent); and about $4 billion in other mandatory cuts.

(snip)

The cuts were created in 2011, they went into effect Friday, and the nation will begin to feel the impact in the days that follow. Exactly how soon, we don’t know. But we’ll feel them a little more in the coming weeks, and even more the following month. And even more the month after that. And so on, all the way to either 2021 or whenever Washington decides to replace it with something else.

(snip)

The White House believes that the impact of the cuts over the next several weeks will bring Republicans back to the bargaining table on taxes. The GOP, meanwhile, says that’s not going to happen.

Man, this stuff manages to be both excruciatingly boring and kind of terrifying all at once.

True story. It also may become a little more of both in the coming weeks.

Wait, come again?

The next fight—there’s always a next fight in Washington—will occur over how to keep the federal government running for another year. The current stopgap bill that does that runs through March 27. If and when that expires, we’re looking at one-day-a-week furloughs multiplied by five, for pretty much the entire government. In other words: government shutdown.

Yes indeed: the same people, who more than a year and a half ago planted a booby trap to force themselves to do the right thing but still couldn’t get out of its way, are now less than four weeks away from another self-imposed drop dead date.  If they miss this deadline, the government’s spending authority runs out and the lights go out on almost everything.

What could possibly go wrong?

Pas de trois, denouement, house lights up

With fewer than 12 hours to spare (a lifetime, apparently, in the ways of Washington) the president has signed into law the combination debt ceiling increase/spending-and-deficit reduction compromise approved by both houses of Congress.  There, now don’t you feel much better about everything?  I mean, it only took a few months of bluster and pontificating, and a little threat to keep the nation from paying its bills on time, to get our government to pass a simple debt ceiling increase and take a small step in the direction of fiscal responsibility.

The last act of this tired drama was predictable: the loudest of the antagonists made a great flowery show of establishing their innate human goodness while talking past one another directly to those in the wings who were already persuaded of the rightness of their case…they executed the thrust and parry of choreographed stage fights which held no real threat of damage since the outcomes were predetermined…when time wound down minor characters took center stage to deliver the resolution then ceded the spotlight once again to the stars, who declaimed the lessons of the play and bid us all a good night.

Now the treasury has cash to pay the bills, and Congress is faced with continuing negotiations to find ways to cut spending and/or increase revenue (I’m hoping for the “and”) to get the government closer to living within its means.  They got there by compromising, which means no one is happy with the product:

Some in both houses are unhappy that there were no tax increases to spread the pain; some are unhappy there weren’t even more cuts to get closer to a final solution in one fell swoop; Democrats are unhappy that GOP priorities suffered few hits (but pleased that the cuts are not as severe as in earlier proposal by Rep. Paul Ryan); Republicans are unhappy about potential cuts to the Pentagon budget if future negotiations are not successful; and Tea Partiers are unhappy because there are no significant spending cuts right now and promised future cuts are contingent on the approval of future Congresses.

The proponents of restraint in government spending should see this as a great victory for their cause: it’s not everything they wanted all at once, but they got the president and Congressional Democrats to give more than would have been considered realistic just a few months ago.  That many of them do not—that they feel any compromise was an unforgiveable moral failure—is cause for concern, and the proponents of responsible behavior by grown adults in elected positions of responsibility should see this as a nightmarish premonition of things to come, if not in the budget talks later this year than the next time a debt ceiling needs to be increased.

Now, for those who have the stomach for it, we face the prospect of watching a new select committee of members from both houses and both parties work to find ways to reduce the deficit, and watching both houses debate and vote on a balanced budget amendment—all by end of the year!

How will cuts in federal government spending impact an economy still struggling to recover from recession and build new jobs?  Can we do something about overhauling tax code and/or entitlements, the real answers to a healthier federal budget?  I’m much less concerned right now with who won or lost the latest political fight than I am with a more pertinent matter: how does this deal help the country?

A tour de farce plays on!

Step by step, inch by inch, the passionless play proceeds: the House speaker proposes a new combination budget-cutting and debt ceiling-raising plan, then stands back when independent analysis shows it won’t generate the savings he promised, before the Congressional Budget Office gives good grades to the Senate majority leader’s plan (which saves little more than the speaker’s proposal).  Democrats are offering more than anyone would have expected, while some Republicans are revolting against their leadership for even thinking about going along with them, for not demanding more and more.  Who will be standing when the music stops next?

While I still expect that sanity will prevail and an agreement will be reached to prevent a crisis, nobody in Washington is doing anything about anything else and we look like a bunch of doofuses to the rest of the world as our nation moves closer to default.  So what, you ask—what the hell happens to you and me if they don’t raise the debt ceiling?

Q: Won’t refusing to raise the debt limit cut the deficit?

A. No.

Q: Do you mean that Congress can pass a budget that requires borrowing, and then argue later about whether to approve that borrowing?

A. That’s right.

Q. So, what happens to government spending if the debt limit is not raised? Will the United States default?

A. The United States will not have enough money to pay all of its bills… The possibilities range from “prioritizing” some payments and paying them first to paying bills in the order in which they were received.

The Bipartisan Policy Center analysis notes that if the government were to choose to pay the interest on its debt, Social Security benefits, Medicaid and Medicare payments, defense contractors and unemployment benefits, it could not have enough left to pay for the salaries of federal workers and members of the military, Pell grants for college, highway construction or tax refunds, among other things.

It doesn’t stop there: a default means some combination of government bondholders don’t get paid, government contractors and vendors don’t get paid, government employees don’t get paid, government benefits recipients don’t get paid, and people who don’t get paid have less money to spend so the economy slows down; government creditors demand higher interest rates on future loans and that leads to higher interest rates for we consumers on credit cards and mortgages; cities and states don’t get federal program payments and their own cash flow problems become worse.  Just the threat of default is starting to make the markets nervous.

Our country’s government spends way more than it takes in, and that needs to be corrected.  But as hard as it seems right now to make the choices that will lead to a stronger economy in the long term—and this isn’t going to be all fixed in your first six months in Washington, Mr. and Mrs. first-term Congressmember—it will only be harder if all the problems caused by a default are dumped on top of the ones we already face.  And even if there’s no default, the political playacting that both parties are consumed with right now may make financial markets skittish enough about the future that the credit rating of our country’s debt might be lowered anyway, leading to higher interest rates, etc., etc.

I’ve said this before: first, Congress needs to live up to its responsibility to prevent this totally preventable problem of potential default, then it and the administration can turn full focus on the screwed up federal budget mess that threatens our long-term financial health and security.  By the way, there’s a special tactical unit now on its way to the Capitol to help with that.

Places, please, for the big finish!

Hypocrite or Liar

For a lot of you those are the only choices available to characterize your U.S. representative for his/her vote yesterday on the repeal of the Patient Protection and Affordable Health Care Act.  I am not one of you (this time), but that doesn’t mean you can’t play the game.

The Republican Party majority in the House and Speaker John Boehner made it a top priority to vote on repeal of last year’s health care insurance reform.  They did it even though they know that the Democrats who control the Senate won’t bring it up for a vote there, and that even if the Senate voted for repeal the president would use his veto.  But they wanted to make a political point, get members on the record on this issue, and keep one promise in that Pledge to America many of them took last fall.  I don’t have an issue with any of that.

I do have an issue with a party that claims to be a champion of fiscal responsibility and deficit lowering voting for repeal after they all but covered their eyes and ears and refused to believe the Congressional Budget Office report which found that repeal would actually increase the deficit and leave more than 30 million more people without health insurance.  Boehner said CBO is entitled to its opinion!

If a CBO report is an opinion, it’s the considered opinion of the experts employed by Congress to provide lawmakers with numbers that are not influenced by political needs and desires…it’s the closest thing to a truly non-partisan statement you’ll find in Washington, D.C.  What’s more, a group of independent experts found that the Republican claim that the new health insurance law will kill jobs is not justified by the facts.  The GOP offered an analysis that claims the new law “may” make the nation’s fiscal situation worse; among others, economist Paul Krugman doesn’t think much of that report’s reasoning or logic.

OK, game time.  Here’s a list of how the members of the House voted on repeal of Obamacare; check to see if your rep, who campaigned as an agent of deficit reduction, got to Washington and started off by voting for a bill that would raise the deficit (if it ever became law, which it won’t).  Then you can  ask him/her what they hell they think they’re doing.

Hard economic truth for $2000, Alex

If only that were the figure—the real issue on deck in Washington, D.C., the issue that drove last week’s election results, is economic recovery: when will the economy get stronger, when will job growth get stronger.  It’s the issue that all of most of the nation’s journalists largely ignored, except for predictable emotional pitches.  Alan Mutter recently pointed out the reasons why: the economy is a hard story to tell, and it has nothing to do with easy stories like who is the new president and what will he do, and why do we think he’ll do it, and what do the polls say about what the people think about what he’ll do.

…the myopic press stuck to covering the inside-the-Beltway story of the day – health care, Afghanistan, Supreme Court picks – instead of zeroing in on the things that really mattered to all but the very wealthiest Americans.  Things like: Will I keep my job? What will I do if I get fired? Can I keep my house? Will I be able to send my kids to college? How can I afford to retire?

It’s anybody’s guess if the myopia will be cured soon; the prognosis is not encouraging, but there’s always hope.  There are some trying to sound the alarm: Mutter points out Paul Krugman at the New York Times as one good example (and notes that the good professor is, in fact, not a journalist in the usual sense of the word, but an economist).  I’ll give kudos to Loren Steffy, the very good and very readable business columnist at Houston’s Leading Information Source.  He’s written an excellent summary of where we stand, and it’s not pretty.  Quoting the Congressional Budget Office,

“Unless policymakers restrain the growth of spending substantially, raise revenues significantly above their average percentage of (gross domestic product) of the past 40 years, or adopt some combination of those two approaches, persistent budget deficits will cause federal debt to rise to unsupportable levels.”

Some of the people crying about the national debt these days come off as wacky, but there is a scary kernel of truth in that cry and our government is going to have to address the problem—and blindly rubberstamping an extension of tax cuts followed by another round of collecting campaign donations from lobbyists is not the answer.

The national economy, at its core, is subject to the same rules as your household economy and mine.  If you spend more than you take in, you go into debt; reducing your income doesn’t magically translate into higher revenues; you pile up enough debt and most of your payments are going to the interest and very little to principal, and you never get out of debt.

I’m not saying you and I, or the government, should never borrow money, although it would be sweet not to have to.  But you borrow money to buy a house or a car; sometimes you have to charge to your credit card, like when the extra thousands it takes to buy a replacement air conditioner are not just sitting there in your savings.  But you can never borrow enough to repay all of the principal—ask Bernie Madoff.  At some point you have to bite the bullet and make unpopular choices.

Texas Monthly’s Paul Burka writes today about how the economic rescue plan known as TARP catches flak as an example of big government run amok, despite (a) the fact that it was dreamed up and implemented during the Bush Administration, allegedly a conservative regime that believed in small government, and (b) is costing less than one-tenth of the advertised $700 billion.  TARP was the best thing the administration could come up with to save the whole economy, and if some of the bad guys who caused the collapse got caught up in the rescue then we’re going to have to learn to live with that.

What will Congress and the president do to get this country’s economy headed in the right direction?  I hope more news agencies commit the resources to dig into the question and produce some journalism that will help the economic illiterati like me understand what’s going on.

For that to happen we need more of them to adopt the idea Jack Shafer discusses today in Slate: we don’t need journalists to be unbiased in the sense of not having an opinion on issues, we need more who are honest and curious and hard-working and are committed to using an objective process to reach some verifiable conclusions.

As Bill Kovach and Tom Rosenstiel write in their 2001 book, The Elements of Journalism, traditionally, it was the journalistic method that was supposed to be objective, not the journalist. As long as the partisan journalist comes to verifiable conclusions, we shouldn’t worry too much about the direction from which he came.

This will require an agreement that there are—as a…well, as a matter of fact—certain verifiable truths, and abandoning the current craze of dismissing as biased any “facts” that don’t conform to one’s current opinions.  How about we start with a little optimism about each other on that score.