Bloomberg News

Do-Nothing Congress Dithers on Budget as Deadline Nears

November 29, 2013

Defense Cuts

Rear Adm. Mike Franken, Chief of Legislative Affairs for the Secretary of the Navy, left, speaks with Chief of Naval Operations Adm. Jonathan Greenert, on Capitol Hill in Washington, on Nov. 7, 2013, prior to Greenert testifying before the Senate Armed Service Committee hearing on the impact of sequestration on nation defense. Photographer: Jacquelyn Martin/AP Photo

Congress’s latest attempt at crafting a budget plan is on track to end up the same way as others have in the past decade: with little or no agreement.

Negotiators have little chance of breaking this string of futility, even after a 16-day government shutdown in October that cost the U.S. economy $24 billion. If they do, it’ll only be to curb automatic spending cuts, including $19 billion that hits the Pentagon starting in January.

Now budget experts, labor unions and business groups are saying enough’s enough, and questioning why lawmakers can’t live within their means the way ordinary Americans do and instead lurch from one budget standoff to the next.

“It’s a stupid way to run a country,” said Maya MacGuineas, head of the Campaign to Fix the Debt, a non-partisan advocacy group whose members include business leaders and former lawmakers. “Change comes from two possible things: a crisis or leadership.”

One of the co-chairmen of the campaign is Michael Bloomberg, founder and majority owner of Bloomberg News parent Bloomberg LP and the New York City mayor.

Unlike with previous budget panels, including the failed 2011 supercommittee, there are no immediate consequences if the budget conference misses its Dec. 13 deadline -- the U.S. won’t default on its debt and the federal government won’t shut down for lack of funding.

The committee’s lack of progress is frustrating outside groups, especially business executives, who say congressional lawmakers’ habit of governing by crisis and temporary spending bills is hurting the economy and costing jobs.

‘Chilling Effect’

“The uncertainty has a chilling effect on job creators, households and anybody who’s trying to see around a corner,” said MacGuineas, who is also president of the Committee for a Responsible Federal Budget, a fiscal advocacy group.

Congress in 2009 last passed a budget resolution, the equivalent of a household budget that sets spending parameters for the federal government.

In 2010, disagreement over how to handle the scheduled expiration of tax cuts enacted under former President George W. Bush prevented agreement on a budget resolution and Republicans won the House majority, creating a divided Congress.

The current panel is the fifth bipartisan attempt in three years to address the nation’s debt and deficit. The others, starting with the 2010 debt-reduction commission appointed by President Barack Obama, ended in failure.

‘Something Done’

This one may, too, said Maryland Representative Chris Van Hollen, a panel member and the top Democrat on the House Budget Committee. “Negotiations have to accelerate significantly if we’re going to get something done,” he said.

The conference committee was supposed to mark a return to so-called regular order, where the chairmen and members instead of ad hoc negotiating groups work to craft a budget for the coming fiscal year and figure out a way to replace some of the automatic cuts known as sequestration.

Instead, they’re stumbling over the same obstacles that have prevented past agreements. Democrats want to end some corporate tax breaks while Republicans say they oppose any changes to the tax code outside a broader deal. Republicans want to cut spending on entitlement programs, which Democrats oppose without considerable revenue concessions.

Automatic Cuts

The panel’s progress so far has been limited to agreeing that its objective should be to replace the automatic cuts for one to two years with more palatable spending reductions, Van Hollen said.

“That’s a much more narrow target, but that doesn’t mean we’ll hit the target,” said Van Hollen, noting the full committee has met just twice.

The conference, headed by Senator Patty Murray of Washington and Paul Ryan of Wisconsin, chairmen of their chambers’ budget committees, is the first panel in the past three years to set such a narrow goal. Murray, a Democrat, and Ryan, a Republican, made clear from their first meeting that they weren’t striving for a grand fiscal bargain.

Now, they’re struggling to achieve even a deal in the range of $50 billion to $100 billion just to reapportion automatic spending cuts that lawmakers of both parties agree are stunting investments in the military, scientific research and education.

‘Low Bar’

“It’s demonstrating how difficult it is even to hit a very low bar, which is kind of depressing when you think of how much work really needs to be done,” said Robert Bixby, executive director of the Concord Coalition, a fiscal advocacy group.

For long-term deficit reduction, lawmakers would need to make changes to Social Security, Medicare and Medicaid, which make up almost half of federal spending. Many lawmakers are hesitant to trim the programs amid lobbying from interest groups including AARP, the nation’s largest seniors’ lobby with 37 million members.

It was in 2011, with the U.S. on the brink of a debt default, that Congress created the deficit-reduction supercommittee, empowering it with authority to expedite any agreement through Congress. No deal was reached.

The panel was the fourth such bipartisan commission formed in the preceding two years to deal with the nation’s growing debt and deficit. They included the president’s 2010 commission led by former President Bill Clinton Chief of Staff Erskine Bowles and former Wyoming Senator Alan Simpson, a Republican, who couldn’t get the votes to send their $4 trillion plan to Congress.

Tax Changes

A separate bipartisan group of six senators negotiated a similar plan that never made it to Congress for consideration because of Republican opposition to revenue increases through proposed changes to the U.S. tax code.

Earlier, in mid-2011, Vice President Joe Biden led another group of congressional leaders in talks to raise the debt ceiling and curb the deficit.

The group fell apart after House Majority Leader Eric Cantor, a Virginia Republican, dropped out of talks over Democratic demands that tax revenue be included. With each attempt, the debt-reduction target was scaled back, with Biden’s group aiming for a $2 trillion reduction over 10 years.

In November 2011, the supercommittee struck out amid disagreements on revenues and entitlement programs. That triggered the automatic spending cuts to domestic and defense programs now in effect. Murray and Ryan are now trying to reapportion the cuts to blunt their effects on the Pentagon and domestic programs such as Head Start that serve poor children.

Revenue Divide

While the two continue to negotiate over the Thanksgiving holiday, aides say they haven’t come to terms on revenue.

Talks are further complicated by a recent demand by House Speaker John Boehner, an Ohio Republican, that a deal shouldn’t include cuts to farm subsidies, removing one of the few areas where both parties agree reductions are needed, Van Hollen said.

“The math doesn’t work if you start doing that,” he said.

Even if Ryan and Murray reach a compromise, it would have trouble winning approval by the full committee, let alone passage in a divided Congress.

“A budget conference committee of 29 representatives and senators is so unlikely to agree on anything that, unless they want to go hungry, they had better delegate to a single staffer the authority to decide what to order for lunch,” said Stan Collender, managing director of Qorvis Communications LLC in Washington and a former congressional appropriations aide.

Funding Expires

The real deadline is Jan. 15, when government funding again expires, said Bixby, and there is a chance that Ryan and Murray can hammer out a deal by then.

Meanwhile, businesses are growing frustrated with Washington’s inability to bridge its differences to replace spending cuts that no one thinks are good policy.

“Uncertainty holds back growth and investment,” Dorothy Coleman, vice president of tax and domestic economic policy at the National Association of Manufacturers in Washington, said in an e-mailed statement, urging Congress and the administration to work for policies to provide stable growth.

“Given the divisions between the parties and our experience over the last three years, it’s difficult to be optimistic,” Dan Stohr, a spokesman for the Aerospace Industries Association, said in an e-mail.

The Arlington, Virginia-based industry group’s members include defense contractors General Dynamics Corp (GD:US)., Lockheed Martin Corp (LMT:US). and Raytheon Co (RTN:US). Lockheed, the largest U.S. government contractor, will cut 4,000 jobs in response to declining federal spending.

“We cannot keep lurching from crisis to crisis,” Stohr said. “It’s having a very detrimental effect on investments” for the trade group’s members, including layoffs and less money for research and development, that prevents businesses from being able to plan ahead.

To contact the reporters on this story: Heidi Przybyla in Washington at hprzybyla@bloomberg.net; Brian Wingfield in Washington at bwingfield3@bloomberg.net

To contact the editor responsible for this story: Jodi Schneider at jschneider50@bloomberg.net


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  • GD
    (General Dynamics Corp)
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  • LMT
    (Lockheed Martin Corp)
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