Committee for a Responsible Federal Budget

‘Line’ Items: Tax Reform, the Fed, and Congress Back to Work

Commission Commencement – President Obama signed Thursday the Executive Order officially creating the National Commission on Fiscal Responsibility and Reform. He also named former Clinton White House Chief of Staff Erksine Bowles and former Republican Senator Alan Simpson as the bipartisan co-chairs of the panel. The group is tasked with “identifying policies to improve the fiscal situation in the medium term and to achieve fiscal sustainability over the long run.” It will report on its recommendations by December 1. After originally being non-committal, Republican leaders last week promised to appoint members to the commission. CRFB joined the Concord Coalition and the Committee for Economic Development last week in praising the choices of Bowles and Simpson and offering recommendations for making the commission successful.

A Healthy Debate? – The White House today posted its health care reform proposal in advance of the White House health care summit this Thursday. President Obama has challenged Republicans to bring their own proposal to the gathering, which will be televised live. Although they expressed initial reluctance to participate due to concerns that the event would just be a photo op, Republicans say they will attend. It’s looking more likely that Democrats in Congress will consider a health care overhaul using the budget reconciliation process so that passage will require a simple majority instead of 60 votes.

Fed Up with Debt – A key Fed bank president last week strongly stated that America’s rising debt must be addressed. In remarks before a Peterson-Pew Commission on Budget Reform conference on “Avoiding a Government Debt Crisis” Thomas Hoenig, President of the Federal Reserve Bank of Kansas City and a voting member of the Federal Open Market Committee this year, said that monetizing the debt as some suggest or continuing the status quo would likely lead to an inflation-induced economic crisis. The Fed last week raised the short-term discount rate a quarter point to 0.75 percent, indicating that it may begin reducing its balance sheet and unwind the enormous liquidity it pumped into the financial sector.

Congress Gets Back to Work – Congress reconvenes this week after the Presidents Day recess to a full plate of hearings and other business. Various committees will hold hearings on the President’s budget and Federal Reserve Chairman Ben Bernanke will present his semiannual monetary report to the House and Senate banking committees.

Getting the Job Done? – The Senate plans to vote on a jobs bill crafted by Majority Leader Harry Reid today. The bill is expected to cost about $15 billion, about one-tenth of the cost of the bill passed by the House. The Senate is still considering how to move extensions of expiring provisions, including emergency unemployment benefits and a federal COBRA subsidy for laid-off workers, which were included in the original Senate bill but were carved out by Reid. Those provisions expire on February 28 along with the “doc fix” preventing a 21 percent cut in Medicare payments to doctors.

A Taxing Effort – Senators Ron Wyden (D-OR) and Judd Gregg (R-NH) plan to unveil comprehensive tax reform legislation this week. A joint statement from the duo says the bill “will make the federal tax code simpler and fairer for all Americans and businesses of every size.”