Friday, August 12, 2011

budget sausage

After three happy but hectic weeks with grandchildren, I now have had time to catch up on the news, especially the new budget control act that ended, at least for now, the debt ceiling crisis.
The new law doesn’t, by itself, cut government spending or make reforms to mandatory [entitlement] programs. Instead, it establishes several processes that push the government in those directions. It also creates incentives for Congress to pass a Constitutional amendment requiring a balanced budget and for the new supercommittee to reach bipartisan agreement on additional spending cuts of at least $1.2 trillion over the next decade.

Lawmakers cobbled together several provisions of previous budget control laws, especially from the 1985 Gramm-Rudman-Hollings law that contained automatic across-the-board “sequesters” and the 1990 Budget Enforcement Act that capped discretionary spending with specific dollar amounts. They added the idea of the Senate’s Republican Leader, Mitch McConnell [R-Ky], to allow some debt ceiling increases subject to vetoable resolutions of disapproval by Congress. Surprisingly, they restored the 1987 firewall protecting security spending and in particular programs for international affairs, veterans, and homeland security.
And they built in some loopholes. Spending for “Overseas Contingency Operations” – the $127 billion line item for Pentagon and State Department activities for ongoing wars and against terrorists – is exempt from the budget ceilings. As under earlier budget laws, Congress can also declare certain expenditures “emergencies” to get around the caps, although there are limits in the amounts allowed for disaster relief. Some domestic programs get special treatment or protection, but not the IMF as in earlier years.

The new law has several provisions to prevent Senate filibusters or procedural challenges to the various measures allowed under the new processes. No amendments or procedural delays can be used on the debt ceiling disapprovals or the supercommittee recommendations [if they can agree on something] or on the balanced budget amendment to the Constitution.

So what’s likely to happen? The debt ceiling is safe until 2013, for a 2/3 vote overriding a presidential  veto of a resolution of disapproval seems unlikely. The constitutional amendment has to be voted on between October 1 and December 31, but a 2/3 vote is unlikely for the latest version of that measure, which would require California-style supermajorities to increase taxes.

There there’s the supercommittee. If a majority does not agree on at least $1.2 trillion in additional cuts by November 23, then a full-scale “sequester” occurs in January, half of which must come from the Pentagon budget and some of the non-defense cuts must come from entitlement programs. This is supposed to scare lawmakers into making balanced and sensible cuts and perhaps even raising some revenue through changes in “tax expenditures” [also known as tax loopholes].

My first reaction was to agree that those automatic cuts were too draconian to be acceptable. And in fact, the very small first Gramm-Rudman-Hollings cuts were still deemed to be so disruptive, Congress found ways to evade ever facing them again.

On further study, however, I’m ready to predict a muddle-through. If the new panel packages the cuts tentatively agreed by the Biden group [$800 billion] and adds a few more items, the sequester would be limited to the difference, spread over nine years. Those figures would be painful, of course, but not as painful as $133 billion in any one year. 

Such a not-quite-good-enough outcome kicks the problem down the road to the 2012 elections and the expiration of all the Bush tax cuts. That may not help the country much, but it would probably look good to the politicians on all sides.

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