Budget Bedlam This Fall

Stan Collender

August actually is a pretty good time to be in Washington.

Yes, the weather usually is awful. But with Congress gone, getting to work isn’t as stressful because there’s less demand on roads and public transit. You can get up later and still get to work on time.

And…of course…there’s daily upbeat news from the Redskins’ training camp.

I saw and felt all of this almost immediately on Friday when the House followed the Senate out of town for a five-week recess. Traffic was indeed lighter than usual, getting a table at my family’s favorite local Italian bistro wasn’t a problem and RGIII was interviewed on all of the local channels. Good times for sure.

But the usual sense of dramatically less stress that typically takes place at the same time didn’t happen. Instead of talking about vacation plans, the standard topic of conversation all weekend was about what’s going to happen when Congress comes back.

As a federal budget wonk, I was especially and repeatedly put on the spot by friends, reporters and clients about what’s going to happen after Labor Day.

The basic answer is (1) I don’t know, and (2) anyone who tells you he or she does isn’t telling you the truth.

When it comes to the budget there’s so left much to do, so many moving pieces and so little time that the overall situation — let alone the fate of a particular bill — is virtually impossible to predict with any degree of certainty.

And when you add the somehow-still-increasingly-intractable budget politics to the mix, the odds of being right about what’s going to happen get even longer unless you’re suggesting something close to fiscal chaos.

That’s what I’m predicting: budget bedlam this fall and beyond.

Here are the key elements about what’s ahead…or not ahead…on the budget when Congress returns to Washington in September.

1. Debt Ceiling. I’m listing this first only because it’s not something that that has to be dealt with immediately. Yes, the debt ceiling will have to be raised at some point, but the latest word from the Treasury is that the “extraordinary measures” it can take to delay the day of reckoning will last into November. In other words, as much as the White House might like to get this out of the way, there’s no rush.

That’s not to say that Congress and the White House couldn’t work something out on the debt ceiling in September. But the likelihood of them doing a deal before it’s absolutely needed is as small as me not needing my air conditioner in Washington this month.

2. Government Shutdown. It’s important to note that I’m not labeling this “fiscal 2014 appropriations.” The truth is that none of the individual appropriations bills — the legislation that supposed to be signed into law before the fiscal year begins — have any real chance of being enacted by October 1. That means we’re talking about a continuing resolution…or a shutdown.

I’m exceptionally hesitant to predict a shutdown. Although I was technically correct last year when the government did close for about 40 minutes, I obviously was also wrong that a longer shutdown was going to happen.

Still, concluding that a shutdown is more likely this year than it was last year actually is quite easy:

  • The tea party wing of the House GOP is being more adamant than ever about cutting spending and eliminating funding for the implementation of Obamacare.
  • House Speaker John Boehner (R-OH) is weaker and has even less control over his members than he had last fall.
  • The very large differences between House and Senate Republicans on budget and tax issues have only gotten larger.
  • House Democrats are more steadfast in opposing the GOP and not providing the votes needed to get something passed when the Republican majority can’t do it on its own.

Then add three more things to all this already considerable disarray.

  • The White House is negotiating with Senate Republicans on a budget deal even though House Republicans are the Obama administration’s biggest political problem.
  • Senate Minority Leader Mitch McConnell (R-KY) and Lindsay Graham (R-SC) are facing serious tea party primary challengers and, therefore, have far less room to maneuver on the budget.
  • In part because of the McConnell and Graham primary challenges, there is a growing possibility that Senate Republicans will filibuster Obama-nominated federal judges and others. That creates the continuing possibility that Senate Democrats will use the so-called nuclear option to prevent filibusters and that Senate Republicans will retaliate by bringing all other work in the Senate to a complete standstill is very real.

As a result, it’s hard to come up with a scenario that makes even a short-term let alone a full-year budget agreement by October 1 a sure thing.

3. Sequester. Let me start by correcting a common misperception: If there is a sequester for fiscal 2014, it won’t happen on October 1 or any time this fall.

Sequestration takes place 15 days after the end of the session of Congress. Technically that could be any time, but Congress almost certainly won’t be able to adjourn until the next session begins because Senate Republicans will want to prevent the president from making recess appointments during adjournment. That makes mid-January the most likely time for a sequester to occur.

But the fact that it might not happen until next year won’t keep the sequester from having an impact on the budget debate this fall. Some House Republicans are insisting that the spending in the fiscal 2014 appropriations be at the sequester level. But, as was obvious this past week when the Transportation/Housing and Urban Development appropriation was pulled from the agenda because its spending levels were both too high for some Republicans and too low for others, there’s no agreement about that.

That means that, at the very least, the possibility of the across-the-board reductions that could happen in January will have an impact on every budget negotiation. For many, the sequester spending levels will be the default position and the minimum they will accept.

4. The Grand Bargain. Can we all please stop talking about a grand budget bargain this fall as if it is anything but a fantasy? If by “grand bargain” we’re talking about tax reform that increases revenues, and Social Security and Medicare spending reductions in exchange for stopping sequesters, there’s no way — repeat, no way — that it happens this fall, this year, or before the next election a year from this November.

Even a mini-bargain like the one the White House supposedly is trying to put together with some GOP senators won’t fly in the House of Representatives. Here’s a secret: it’s not likely to fly in the Senate either.

5. Tax Reform. See #4 above.

I’m expecting the federal budget bedlam to last through the fall and into next winter.

A short-term continuing resolution negotiated very close to October 1 that lasts until the middle of November, that is, until the extraordinary measures run out, is the most likely tactic, and even that’s only got about a 60 percent chance of happening.

It may well be that Boehner needs to show his tea partiers that he is willing to shut the government for them, and the tea partiers may need to show their voters that they were willing to let it happen.

That first short-term CR then most likely will be followed by a combination second continuing resolution and debt ceiling extension that lasts until the middle of January so that all three fiscal deadlines — government funding, debt limit and sequester — come together in a new fiscal cliff (#cliffgate) that roils markets and politics yet again.

That’s also about the time when the Obama fiscal 2015 budget is supposed to be submitted to Congress, but it almost certainly will be delayed, perhaps for months, because the fiscal 2014 decisions will not yet be final. That will extend the budget bedlam through most of next year.

In other words, if you follow the federal budget for any reason, enjoy this August. The weather may be bad, but the Redskins are undefeated, traffic is light and you can grab an extra hour or so of sleep. Those may be the best things that happen to you for quite some time.

Originally posted at Capital Gains and Games.

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