The Budget Conference Meets

This past Wednesday, the conference committee on the fiscal year 2014 budget met.  The plan is that they will meet again on November 13, two weeks from now.  Their deadline to produce recommendations is December 13, and their objective is to avoid another government shutdown and the impending budget sequester that is set to occur on January 15.

A two-week recess with such a short deadline might not seem promising.  However, the recess is not the problem.  Public meetings of conference committees are not where the work is done.  Under the best of circumstances and with the best of outcomes, a conference committee might have one public meeting, during which all of the members present opening statements in which they say how important the work of the conference committee is; and then a second public meeting, during which the members vote on the final product, and present closing statements in which they say how important the work of the conference committee was.  In between, the important decisions were made in private meetings, generally informal (to avoid requirements that the meetings be held in public).

The real problem is that it is not clear whether anyone in the room has the authority to cut the deal.  The issues at stake long ago have escalated to the leadership level.  In fact, with the margins in the two chambers so narrow, even the leaderships must go to their rank and file hat-in-hand and request their votes.  We know from the last shutdown season that the caucuses can send their leaderships back to the drawing boards, and leave the necessary legislation in limbo.

The opening statements in the budget conference were generally conciliatory.  However, they stopped far short of common ground.  Republicans continued to declare tax increases off limits, while Democrats asked for at least one tax-loophole closure to justify the expected cuts in entitlement programs to “pay for” lifting the budget sequester.  This time, as last time, Republicans have the upper hand, at least in theory.  The Republican House could send the Senate a continuing resolution bill to extend appropriations with the sequester, with an increase in the debt limit attached.  Democrats in the Senate would have to come up with a reason for the House Republicans to change their minds.

It is worth remembering that the ostensible goal of this conference – to remove the sequester, reduce entitlements and / or increase taxes to offset that budget cost, and increase the debt limit – would neither reduce the long-term debt problem nor stimulate the economy.  Of course, there are potential questions of timing of spending increases versus other budget cuts, and there are potential permanent spending cuts that in the very long term would exceed the spending increases.  But speaking broadly, both the potential macroeconomic and fiscal-responsibility stakes in this game are extremely low.  You probably have heard the old saw that it is the low stakes that make academic politics so vicious.  Perhaps the same will prove true about the budget conference, but we have learned very little from the opening meeting.

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