The Political Implications Of The “Fiscal Commission Budget Plan”

Last week, Senate Budget Committee Chairman Kent Conrad (D-ND) put forward a budget resolution.  Although on the surface this is an unremarkable event – it is supposed to happen every year, before this time – the particulars were highly unusual.  They underline the degree to which the process of budgeting in Washington is stalled.

The budget resolution, as you know, is an annual outline of the nation’s overall fiscal plan.  It is a “joint resolution,” rather than a law, passed by the House and Senate without the president’s signature or his formal involvement, and it does not have the force of law.  In most years, its major function is to set forth a ceiling for the amount of annual appropriations that the Congress may legislate.  In some years, it also can provide instructions for changes in the law that governs taxes and mandatory (or “entitlement”) spending, which can be passed in the Senate by a simple majority, without the risk of a filibuster.  This year, with political control of the Congress divided, meaningful changes in tax and entitlement policy are far out of reach.  And beyond that, just last August, the Congress and the President negotiated a deal to set appropriations spending levels for this year while increasing the debt limit.  So in some sense, a budget resolution this year might be thought unnecessary.  Even so, many Members of Congress have often repeated, “If you can’t budget, you can’t govern.”  And the Congress has not completed a budget resolution for three years.

The two political parties would tell very different stories about why the budget process has been so dysfunctional.  Clearly, the parties are more polarized than they have been in decades; political scientists say that their voting patterns in the Congress show virtually no overlap, thus leaving little ground for compromise.  With no chance of success, and in an election year, there is little motivation to line up behind the painful choices that will be necessary to fix the budget.  It is one thing to take a tough vote for a bill that is going to pass and make a difference for the country; but it is very different to take that tough vote for an empty gesture.  Thus, both sides openly say, or privately expect, that the budget issue will be decided (in some fashion) in the November election.

Another complicating factor this year is the plethora of automatic policy changes – both tax increases and spending cuts – that are already scheduled to take place under current law.  Clearly, some decisions will need to be made, even though, as an earlier post explained, those decisions might well wait until even after the automatic changes nominally take effect – early next year, after the new Congress is seated and the President (new or not) is inaugurated.  In such a situation, any concession – which would be required for a successful bargain – could be seen as negotiating with oneself.  Try to put forward a middle-ground package, and the other side would be likely to try to pull the middle ground toward their end of the spectrum with subsequent further negotiating demands.

The House has already passed its own budget resolution, with all Democrats plus 10 Republicans voting no.  Given its procedures, the House is far more likely to produce a firmly partisan resolution, expecting compromise to develop later in a conference committee.  However, the Senate Majority Leader, Harry Reid (D-NV), already had announced that the Senate would not take up a resolution at all this year.  He believed that last August’s debt-limit deal, embodied in the Budget Control Act, set the necessary appropriations levels and therefore obviated the need for an actual resolution.

Chairman Conrad had a somewhat different agenda.  Having announced his retirement, he probably wanted to end his Senate career with a strong statement for his long-lived goal of deficit reduction.  Furthermore, he clearly wanted to prepare the ground for what might be an opportunity to address the budget problem after the election.  He said quite plainly in the press that he believed that the chance of action before the election was close to nil.  However, with the pressure of impending automatic tax increases and spending cuts at the end of the year, Chairman Conrad believed that there would be at least a chance of compromise in the inevitable lame duck session after Election Day.

There remained the question of “negotiating with himself,” and making compromises that the other side would quickly bank and then ask for more.  Chairman Conrad tried to finesse that problem by making his resolution the Bowles-Simpson report, prepared by the President’s Commission on Fiscal Responsibility and Reform.  There might have been at least some sense of ownership on the part of Congressional Republicans, because some of their Members participated in that commission.  Based on the initial reactions reported in the press, however, the current Republican leadership on Capitol Hill shows little inhibition to criticize that report as containing too much in tax increases and not enough in spending cuts.

Those criticisms highlight an ongoing problem in the budget negotiations centered (roughly) on the knotty problem of the “baseline.”  Tax increases and spending cuts must be measured against some counterfactual, and by choosing a particular counterfactual level of either spending or taxes, a player in these negotiations can try to make his or her opponent’s proposals look unreasonable or unfair.  But there is no definitive counterfactual for either spending or taxes.  As an example of this insoluble problem, Chairman Conrad chose as his tax baseline the current law, under which all of the temporary 2001 and 2003 tax cuts expire.  So the tax program in the Conrad resolution is to restore the tax cuts for taxpayers with incomes under $250,000 (for families; $200,000 for single persons), and therefore Chairman Conrad describes his program as a tax cut.  However, his resolution, like the original Bowles-Simpson report, would raise more revenue than virtually anyone expects, because of the strong predisposition of the Congress to keep the tax cuts in place.

Because of resistance from members of his own party, who did not want to face unpopular votes on a budget resolution that clearly is going nowhere, Chairman Conrad did not allow any amendments or any votes in the Budget Committee.  He merely discussed his resolution, and then set it aside for another day – possibly in a lame duck session of the Congress later this year.

However, there is one wrinkle in this budget process.  Senate rules allow any Senator to bring a budget resolution to the floor if the Budget Committee itself fails to do so.  Several Republican Senators have submitted their own budget resolutions, apparently for that purpose.  The process by which such a non-Committee resolution would be brought to the floor is less than clear, because it is rarely undertaken.  Whether Chairman Conrad might have plans to cut off such an effort with his own resolution will be an interesting prospect for Senate- and budget-watchers.

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