The Smart Money: Crisis averted - the cost to Congress and the country

Posted Tuesday, October 22, 2013 in Analysis

The Smart Money: Crisis averted - the cost to Congress and the country

by Gina Hamilton

In a late-night, last minute deal, the Senate passed a budget deal that keeps the government open through Jan. 15 and the debt ceiling raised until Feb. 7 of 2014.  The chastened Speaker of the House brought the bill to a vote, where it passed 285-144.  A majority of House Republicans voted against it.  The next morning, President Obama signed the bill into law, and that was that.

The House Republicans got absolutely nothing for the sixteen-day shutdown or in the bill to reopen government.  The only "sweetener" was a provision forcing the administration to check the incomes of people who are getting federal subsidies for health care.  However, that provision is part of the original Affordable Care Act.

Republicans' approval numbers dropped like a stone during the shutdown, and aren't bouncing back.  Everyone involved took a hit, including Democrats and the president, but Democratic and administration numbers were much less stricken.  A new CNN poll released Tuesday shows that 75 percent of voters say that Republicans don't deserve to be reelected, as opposed to 54 percent who say Democrats don't deserve to be reelected.  There is an eight-point spread between people who say they'll vote for a Democrat in 2014 and those who say they'll vote for a Republican.  Another poll suggests that even "safe" Republican seats, well, aren't.  A PPP poll surveyed voters in Republican-held House districts and found that 48 of the seats are currently underwater to a generic Democrat in the race for 2014.  Democrats need only 18 seats to retake the House.

Which is all very bad news, if you're a Republican.  But the election is a year away, and a lot can happen during that time.

Including possibly another shutdown and debt ceiling debacle.  But this time, the deck is stacked against Republicans, and it seems unlikely to happen.

Senate Minority Leader Mitch McConnell categorically ruled out another shutdown.  The deal made in the Senate requires a conference committee - a committee made up of House and Senate members, many chosen by leadership.  The Senate has the lead role, so its entire budget committee is part of the conference, as well as four House Republicans and three House Democrats, chosen by their leadership.  There are 29 members altogether.  

House Republicans: 
Rep. Paul Ryan (Wis.), Rep. Tom Cole (Okla.), Rep. Tom Price (Ga.), Rep. Diane Black (Tenn.)

House Democrats:
Rep. James Clyburn (S.C.), Rep. Chris Van Hollen (Md.), Rep. Nita Lowey (N.Y.)

Senate Republicans:
Sen. Jeff Sessions (Ala.), Sen. Charles Grassley (Iowa), Sen. Mike Enzi (Wyo.), Sen. Mike Crapo (Idaho), Sen. Lindsey Graham (S.C.), Sen. Rob Portman (Ohio), Sen. Pat Toomey (Pa.), Sen. Ron Johnson (Wis.), Sen. Kelly Ayotte (N.H.), Sen. Roger Wicker (Miss.)

From Senate Democratic Caucus: 
Sen. Patty Murray (Wash.), Sen. Ron Wyden (Ore.), Sen. Bill Nelson (Fla.), Sen. Debbie Stabenow (Mich.), Sen. Bernie Sanders (Vt.), Sen. Sheldon Whitehouse (R.I.), Sen. Mark Warner (Va.), Sen. Jeff Merkley (Ore.), Sen. Chris Coons (Del.), Sen. Tammy Baldwin (Wis.), Sen. Tim Kaine (Va.), Sen. Angus King (Maine)

Nine of the fourteen Republicans - Ryan, Price, Black, Sessions, Grassley, Enzi, Crapo, Toomey, and Johnson -  voted 'no' on the budget deal. None of the 15 Democrats and independents did.  A couple of the Republicans appointed to the conference committee are moderates, including Portman and Ayotte.  So it is unlikely in the extreme that the committee, whose decision will be subject to a straight up or down vote in both houses - will be weighted toward the extreme conservative faction.

The conference committee will come up with a plan to cut some spending, possibly add some new revenues, and make some alterations to the deeply unpopular sequester budget before the deadline.  In fact, the deadline for the committee is Dec. 13, so that the aides have time to review the provisions and the bill can be published ahead of the Christmas recess. With only a single vote difference in favor of Democrats, compromise will be necessary to reach a final decision that will pass both houses, but all agree that the Democrats are in the driver's seat this time around.

Spending Cuts

Senate Budget Committee Chairwoman Patty Murray’s (D-Wash.) budget replaced sequestration with an equal amount of targeted cuts and revenue by raising taxes on the wealthy and corporations. Her House counterpart, Chairman Paul Ryan (R-Wis.), kept the sequestration spending level of $967 billion, but restored defense cuts by cutting domestic programs.

There is a difference of $90 billion between the Ryan and Murray budgets.

Technically, almost everything is on the table.  However, there are several members in the conference committee who will not be willing to look at cuts to Social Security or Medicare, especially Sen. Bernie Sanders of Vermont, without adding revenues to the budget.  Any "cuts" will likely take the form of tying Social Security cost of living increases to the so-called "chained" Consumer Price Index.  Currently the cost of living adjustments are tied to the consumer price index for urban workers.  The chained CPI is a little less, done by compounding consumer price inflation every month, instead of every other year.  For Social Security recipients, this would mean a decrease in the amount of money they would receive most of the time.

Because Social Security cuts (or even decreases in the COLA increase) are highly unpopular and hurts people on fixed incomes, cutting entitlements is sometimes referred to as the political third rail.  Democrats are very unlikely to agree to Social Security or Medicare spending cuts without an equal amount of increased taxation, so it may not happen. 

Other potential areas for spending cuts lie in military offsets as soldiers return from Afghanistan.  Already the Department of Defense is planning on at least a $52 billion cut in 2014, mostly because of the existing sequester, but seems to understand that in full peacetime, such a large standing military presence may not be required.  Among the possible areas for cuts include delaying or ending certain acquisition programs, and moving to a posture of so-called "decreased readiness" - cutting the number of soldiers from a wartime high of 570,000 troops in the Army to no more than 420,000.  Other branches of the military, Reserves, and National Guard would face similar cuts.

Taxes

The Murray budget calls for increased income tax on the very wealthy and on corporations.  If passed, her budget would include a trillion dollars in new taxation, rather than cutting any domestic spending or entitlements.  Her budget would have cut off the sequester for the next eight years.   It would not have cut spending; it would have rearranged spending priorities. For instance, the budget would have dedicated $100 billion to economic stimulus.

It would, however, have reduced deficits by $800 billion over ten years, according to the Congressional Budget Office.

The Ryan budget would have cut tax rates and slashed spending on domestic programs while increasing spending on the military.

So there's a lot of distance between the Murray budget and the Ryan budget, and the clock is ticking.

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