Fiscal/Financial Issues as the Dust Settles (Sep. 29)

Mike & Co.

As the dust settles slowly on the Hill following the shock the Boehner resignation/retirement, it’s easier to see where we stand on the fiscal and financial issues immediately affected by it.  Trump and his tax plan make a cameo (he’s great).

Best,

Dana

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For the third straight year, the federal government will not shut down at the beginning of its fiscal calendar.  Yesterday, the Senate passed clean CR,  stripped of the provision to defund Planned Parenthood, with GOP Senators in favor, 31-19.  The House is expected to follow suit tomorrow, in time for the President’s signature with hours to spare before FY 2015 ends at midnight.  The Congressional minority  made virtually no concessions to get the CR.

When the time comes in early December to consider whether to revise or extend the CR through next September, defunding Planned Parenthood won’t be at the center of the debate — it’s res judicata at this point, a hearing or investigation (why not?) promised by Boehner notwithstanding.  Instead, the focus will be on the “sequestration” caps for discretionary spending under the Budget Control Act of 2011.

Likely to get scrutiny will be the balance between domestic and military spending cuts mandated by caps in light of the Overseas Contingency Operations (OCO) fund.  A vestigial funding mechanism designed to deal with the vagaries of war budgeting in the last decade, it was a $89 billion item in FY 2015 and does not count against the sequester caps.  In a helpful primer, two Council on Foreign Relations authors refer to it as a “slush fund” (http://blogs.cfr.org/davidson/2015/06/16/how-the-overseas-contingency-operations-fund-works-and-why-congress-wants-to-make-it-bigger/).

The other issue on center stage then will be the debt limit.  The government’s statutory authority to raise debt to pay its bills will run out within a week or two of Thanksgiving.  The synchronicity of the CR and debt limit expirations, a few weeks before presidential primary voting begins, may make for a dicey December in DC.

The conventional wisdom is that the prospect of Speaker McCarthy dims the odds for Ex-Im Bank reauthorization.   This is true, but McCarthy will be sworn on or about October 31, when Boehner steps down.  That is the day that the Highway Trust Fund (HTF) extension agreed to July expires.  Unless Ex-Im reauthorization can be added to the HFT bill in October, the Bank, in its 80s, will be on life-support.

Meanwhile, Donald Trump brought a brand new tax plan into the world yesterday.  It is a cause for wonder how many trillions of dollars the Trumpian-scale deficits might add to the debt in the end.  He slashes top individual and corporate rates by 40 and 60 percent respectively.  Importantly, he trumped Jeb Bush, whose cuts, though they do see and raise his brother’s cuts of 2001 and 2003 by plenty, can’t match Trump with corresponding cuts of only 28 and 40 percent (NB: Jeb’s capital gains cuts do best Trump’s, but just by a whisker).

 

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