Now that the infamous “Fiscal Cliff” is in Congress’ rear view mirror, more serious fiscal obstacles confront the 113th Congress.
First and foremost is an increase in the federal debt ceiling. We estimate that the extraordinary measures now used by Treasury to keep paying the nation’s bills will run out between Feb. 15 and March 1. Last year’s debt ceiling battle, which produced no fundamental changes in the nation’s debt trajectory, caused the public to wonder if Congress could really ever achieve rational fiscal policy.
In approximate chronological order the fiscal events are as follows:
- Early February, President Obama is supposed to present his Fiscal Year 2014 budget, although this may well be delayed;
- The Congressional Budget Office will issue its annual report and its estimates of the President’s budget using the CBO baseline;
- Mid-February to early March, exhaustion of Treasury’s extraordinary measures to pay the nation’s debts occurs;
- March 1, the delayed “sequester” of FY13 defense and non-defense takes place;
- March 27, the present Continuing Resolution for FY13 appropriations expires, requiring a new CR, an Omnibus Appropriations Bill for FY13, or the passage of the 12 individual appropriations bills;
- Present law requires Congress to pass its own version of the FY14 budget, after both the Senate and House pass their budget resolutions and concoct a conference report (a long-ignored process called ‘regular order’);
- Under normal circumstances, the Congressional Budget Resolution for FY14 would contain Reconciliation Instructions to House and Senate committees to produce legislation that would reduce predicted future deficits.
- Sometime in the late Spring or early Summer, all this should be finished and the Appropriations bills for FY14 should begin to wend their ways through the Congress.
- Finally, under regular order, all the Appropriations bills for FY14 should be passed and signed into law by President Obama before Oct. 1.
What is most striking about that list is the absolute improbability that it will actually take place.
Several challenges to regular order exist.
The President’s budget may be delayed because negotiations impacting the “baseline” for FY14 and beyond have just concluded. How the Office of Management and Budget incorporate those changes into a baseline in quick order remains a big task.
The President’s budget may be further delayed because the pending sequester and possible negotiations during the debt ceiling debate could change the baseline from which changes would be scored by both OMB and CBO.
Congressional battles over the FY13 appropriations bills will be more contentious than many expect, with House Republicans still upset that the current CR spends more than they want.
Congress has failed to come to an agreement on an annual budget for three consecutive years and little has happened that makes it more likely that such a budget will emerge this year.
Without a budget agreement, no Reconciliation Instructions are binding on the relevant committees, meaning that in the Senate any fiscal bills are subject to full amendment and filibuster.
Finally, without a budget agreement the Appropriations Committees and Sub-Committees cannot know how much money they will have to spend in the FY14 bills.
Far from wondering how a $4 trillion, 10-year budget agreement can be achieved this year, realists might ask, can anything serious happen to fiscal policy?
The disappointing results of the fiscal cliff bargaining, combined with the realities outlined above, could lead to yet another year of serious fiscal inaction.
Congress and the President must make up their collective minds quickly that 2013 will be the year of a multi-year agreement on tax and entitlement reform, or whether it will be another year of obfuscation and delay.