Committee for a Responsible Federal Budget

‘Line’ Items: World Cup Edition

“Beautiful Game”and Not-So-Pretty Agenda – Add soccer to all the other distractions in Washington as lawmakers face a packed agenda. With the World Cup under way and workers gathered around monitors in offices across the globe (when they’re not at the local bar), legislators in DC face action on key bills that will affect the nation’s bottom line. Meanwhile, the growing chorus for fiscal responsibility and offsets to spending are becoming as loud and ubiquitous as the sound of the vuvuzela at matches. It may be considered annoying by some, but is music to the ears of debt hooligans like us.

Extenders Bill Can’t Find the Net – The Senate will resume consideration this week of legislation (HR 4213) that will extend tax cuts and expanded unemployment benefits, but getting 60 votes is proving to be even more difficult than scoring goals in South Africa. Senate Majority Leader Harry Reid (D-NV) wants to restore Medicaid aid to states and COBRA subsidies that were dropped from the House version because of widespread concerns about the costs that were largely not paid for. Some senators also want to trim the few revenue-raisers that are in the package. But the same deficit concerns that forced House leaders to pare down their bill are slowing progress in the other chamber. The Bottom Line has been charting the changes in the legislation and impact on the budget. CRFB wants to see more long-term offsets and has offered some suggestions in a paper.

Republican Side Offers Competing Measure – Senate Republicans are offering an alternative to the extenders legislation. Their proposal seeks to fully offset the tax cuts, unemployment insurance and Medicare “doc fix” through spending cuts, as opposed to the revenue provisions in the Democratic version. They don’t have the votes for their measure, but will it force more offsets in the bill?

Supplemental May Take to the Pitch in House – The House may begin consideration of a supplemental to fund operations in Iraq and Afghanistan this week, though it is unclear what other spending the bill may include. House Appropriations Committee Chairman David Obey (D-WI) wants to include additional money to states to prevent layoffs of teachers and other public employees. Democratic leaders wanted the additional spending marked as “emergency” so that it would not have to be offset under pay-as-you-go rules, but now are considering applying unused stimulus funds to pay for the cost after many lawmakers objected. President Obama sent a letter to congressional leaders over the weekend in support of the state aid and provisions in the extenders bill as a means of stimulating the economic recovery. He also called for “additional steps to establish a fiscally sustainable budget path over the medium- and long-term.” He did not offer specifics for reaching this path beyond noting that he wants a three-year discretionary spending freeze and a fee on Wall Street firms to recoup TARP costs. Yet it is time to get specific about how we will address mounting debt in the medium- and long-term. As we argue here, economic stimulus will only be credible if paired with a medium-term fiscal consolidation plan. Like many teams in South Africa, lawmakers are struggling to find a balanced attack; in this case aiding the recovery while not adding to the long-term debt.

Will Estate Tax Be Called Offsides?CQ reports that a proposal to reinstate the estate tax at a lower level than it is currently scheduled to reappear at next year may be taken up by the Senate as a part of a small business tax incentive bill after work on the tax extenders legislation is finally complete. But estate tax changes face a significant barrier in PAYGO requirements dictating that any changes after 2011 must be offset. Getting 60 votes to circumvent the rule will be tricky in an election year. Voters concerned about federal debt likely will frown upon a big tax break for the wealthiest Americans.

White House Looks to Score on Fiscal Responsibility – Budget reform proposals from the White House have been as prevalent as goalie errors on the field as of late. First it asked for new authority to allow federal agencies that save money to keep half of it to spend in other areas, providing an incentive to agencies to spend wisely. Agencies currently have no such inducement as they are required to give back any unused funds. Then the White House announced that agencies must review their budgets and find five percent spending cuts. That was followed by a presidential memo calling for more efficient use of federal real estate. These are modest proposals, but they get the fiscal responsibility ball rolling in the right direction.

Will Defense Budget Produce Goals? – Unlocking Pentagon spending can be trickier than the Jabulani ball, but recent developments may foretell changes in defense budgeting. Defense Secretary Bill Gates recently announced that the Pentagon will aim to find over $100 billion in savings over the next five years, to be redirected to other areas of the defense budget. We applauded the effort in the Bottom Line, but also noted that the effort does not go far enough; defense savings should also contribute to deficit reduction. In that vein, a bipartisan group of lawmakers sent a letter to the president’s deficit commission last week recommending cuts of over $1 trillion over ten years based on a report from a panel of experts.

House May Consider Enhanced Presidential Rescission Authority – Getting Congress to loosen its control of the purse strings is harder to pull off than a bicycle kick, but the president has some support for his version of a watered-down line item veto. Speaker of the House Nancy Pelosi (D-CA) says she supports the proposal for enhanced rescission authority and the House Budget Committee will hold a hearing this Thursday.