Congress Said to Delay Automatic Budget Cuts Until March

From Bloomberg.com:

Republican and Democratic congressional leaders are weighing whether to delay automatic federal spending cuts until March 2013, according to a House aide and industry officials who were briefed on the discussions...

Leaders in both chambers are discussing whether to propose a catch-all bill that would delay the automatic cuts, fund the government through March or later and temporarily extend the George W. Bush-era tax cuts and other tax laws, said the House aide and industry officials, who asked to speak on condition of anonymity.

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Congress Said to Delay Automatic Budget Cuts Until March - Bloomberg

When confronted with the possibility of having to make some tough choices, the bipartisan consensus to avoid fiscal discipline appears to be holding fast. Despite political rhetoric articulating a powerful commitment to fiscal restraint, it appears that yet again such rhetoric rings hollow. Washington still lacks the appetite for fiscal discipline and that lack of appetite is one of the few areas in which there is strong bipartisan agreement. Perennial campaign pledges to reduce the nation's budget deficits remain little more than rhetorical flourishes.

If Congress were to postpone the spending reductions/tax changes temporarily until the economy grew stronger, but put a credible plan for medium-term (5-10 year) fiscal consolidation on the table, that would be one thing. I believe that approach would probably be reasonably prudent at this time. However, no such plan is likely to be offered, much less adopted. A credible fiscal consolidation plan would include discretionary spending reductions, mandatory spending reforms (possibly starting with a macroeconomically painless increase in the Social Security eligibility age), and tax policy changes.

donsutherland1 said:

From Bloomberg.com:



Congress Said to Delay Automatic Budget Cuts Until March - Bloomberg

When confronted with the possibility of having to make some tough choices, the bipartisan consensus to avoid fiscal discipline appears to be holding fast. Despite political rhetoric articulating a powerful commitment to fiscal restraint, it appears that yet again such rhetoric rings hollow. Washington still lacks the appetite for fiscal discipline and that lack of appetite is one of the few areas in which there is strong bipartisan agreement. Perennial campaign pledges to reduce the nation's budget deficits remain little more than rhetorical flourishes.

If Congress were to postpone the spending reductions/tax changes temporarily until the economy grew stronger, but put a credible plan for medium-term (5-10 year) fiscal consolidation on the table, that would be one thing. I believe that approach would probably be reasonably prudent at this time. However, no such plan is likely to be offered, much less adopted. A credible fiscal consolidation plan would include discretionary spending reductions, mandatory spending reforms (possibly starting with a macroeconomically painless increase in the Social Security eligibility age), and tax policy changes.

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I agree with your last paragraph, but I think it makes sense to delay this into early next year to take election politics out of it (to some degree), and to give newly elected lawmakers a chance to get their bearings. Same applies to Romney if he wins. If the cuts go into effect Jan. 1 as scheduled it would stick the new president with a deal he had no chance to negotiate. He would also have to deal with the expiration of the Bush tax cuts in his very early days.

Of course the wisest course would be cancel these cuts and institute a medium/long range plan of spending cuts and tax hikes NOW. Republicans complain that the markets are spooked by amorphous fears of Obama regulation or tax changes, but the truth is that markets really are spooked by the upcoming Jan/Feb fiscal cliff.

donsutherland1 said:

From Bloomberg.com:



Congress Said to Delay Automatic Budget Cuts Until March - Bloomberg

When confronted with the possibility of having to make some tough choices, the bipartisan consensus to avoid fiscal discipline appears to be holding fast. Despite political rhetoric articulating a powerful commitment to fiscal restraint, it appears that yet again such rhetoric rings hollow. Washington still lacks the appetite for fiscal discipline and that lack of appetite is one of the few areas in which there is strong bipartisan agreement. Perennial campaign pledges to reduce the nation's budget deficits remain little more than rhetorical flourishes.

If Congress were to postpone the spending reductions/tax changes temporarily until the economy grew stronger, but put a credible plan for medium-term (5-10 year) fiscal consolidation on the table, that would be one thing. I believe that approach would probably be reasonably prudent at this time. However, no such plan is likely to be offered, much less adopted. A credible fiscal consolidation plan would include discretionary spending reductions, mandatory spending reforms (possibly starting with a macroeconomically painless increase in the Social Security eligibility age), and tax policy changes.

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I hope the rats in office do not succeed in weaseling out of the cuts. They were trying talking about weaseling out those cuts at the end of last November.

http://www.debatepolitics.com/break...c-cantor-floats-year-end-trigger-bargain.html

Im kind of contrary, I think it takes the politics out if the cuts take place no matter who is President and who controls congress.

I think that the cuts need to occur, but instead of doing it all at once, they need to be gradual. An actual plan to get spending and revenue under control that is truly fair wouldn't hurt.

donsutherland1 said:

From Bloomberg.com:



Congress Said to Delay Automatic Budget Cuts Until March - Bloomberg

When confronted with the possibility of having to make some tough choices, the bipartisan consensus to avoid fiscal discipline appears to be holding fast. Despite political rhetoric articulating a powerful commitment to fiscal restraint, it appears that yet again such rhetoric rings hollow. Washington still lacks the appetite for fiscal discipline and that lack of appetite is one of the few areas in which there is strong bipartisan agreement. Perennial campaign pledges to reduce the nation's budget deficits remain little more than rhetorical flourishes.

If Congress were to postpone the spending reductions/tax changes temporarily until the economy grew stronger, but put a credible plan for medium-term (5-10 year) fiscal consolidation on the table, that would be one thing. I believe that approach would probably be reasonably prudent at this time. However, no such plan is likely to be offered, much less adopted. A credible fiscal consolidation plan would include discretionary spending reductions, mandatory spending reforms (possibly starting with a macroeconomically painless increase in the Social Security eligibility age), and tax policy changes.

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The Democrats would like very much for this to happen. 1) They promised cuts that never materialized........again. 2) They can blame the Republican controlled Congress. We need a balanced budget amemdment to the Constitution.

This was a pretend deal anyway, just like all gov't "promises" are. The stupid committee has no authority to do anything, it was only a show to put a new "game show" like twist on the always ignored "pay go" rules. They need a giant wheel in the senate and house labeled with every excuse/exclusion allowed by the "pay go" rules, then when anything spending realted comes up, they just give the wheel a spin, whatever it lands on is announced as the "reason" for the "pay go" execption; emergency... crisis... its Tuesday... election year... hurricane... UFO sighting... national security... month name has an "R" in it... fairness... bipartisan agreement... ;-)

Prof. Peabody said:

The Democrats would like very much for this to happen. 1) They promised cuts that never materialized........again. 2) They can blame the Republican controlled Congress. We need a balanced budget amemdment to the Constitution.

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Neither side wants the cuts to happen. Democrats know that it's stupid to cut spending when the economy is weak and Republicans don't want to PO their defense contractor friends.

AdamT said:

Neither side wants the cuts to happen. Democrats know that it's stupid to cut spending when the economy is weak and Republicans don't want to PO their defense contractor friends.

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You mean the Democrats don't want cuts to their Public Service Union friends don't you?

AdamT said:

I agree with your last paragraph, but I think it makes sense to delay this into early next year to take election politics out of it (to some degree), and to give newly elected lawmakers a chance to get their bearings. Same applies to Romney if he wins. If the cuts go into effect Jan. 1 as scheduled it would stick the new president with a deal he had no chance to negotiate. He would also have to deal with the expiration of the Bush tax cuts in his very early days.

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IMO, U.S. fiscal credibility is on the line. If Congress keeps postponing implementation of difficult choices, how can one be sure that future fiscal legislation will be implemented, especially if such legislation promises to tackle far more difficult structural issues?

Much as I think the sequester is imperfect and the timing is inconvenient, I believe carrying through is better than doing nothing. Given recent past experience, there are no assurances that Congress would suddenly reach agreement on a credible package in March. Indeed, odds are probably against such an outcome, especially as Congress already had ample time and opportunity to do so via its "Supercommittee."

My strong preference, of course, remains what I described in my last paragraph. In any case, I believe the most likely scenario is, in fact, a postponement of the spending and tax changes. Odds of a "grand bargain" of sorts during spring 2013 are also fairly low--triggers or sequestration mechanisms might be offered, but the credibility of such devices would be questionable, as odds might again favor Congressional action to avert difficult sacrifices. Consequently, the U.S. could see its credit rating downgraded by other ratings agencies in 2013 or possibly 2014, and perhaps by more than one notch. If Europe has begun to stabilize, some of the "safe haven" benefits that have insulated the U.S. from its worsening credit position might be starting to dissipate. If so, a near-term modest increase in interest rates consistent with the added risk premium could follow.

Prof. Peabody said:

We need a balanced budget amemdment to the Constitution.

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I'm not sure such an amendment would work. Most states have balanced budget amendments. Yet, many of them have consistently run deficits on a total budget basis or via dramatic increases in their unfunded liabilities (insufficient funding of health and pension benefit obligations might create the impression of a balanced budget, but the impact is the same as deficit spending: a pile-up of debt). The end result has been weak fiscal positions in a number of states, including but not limited to Illinois and California.

How would WWII have worked out if we'd had a balanced budget amendment?

I have absolutely no faith that we're ever going to see legitimate spending cuts. We've created plans, we've implemented programs to decrease spending and at the next-to-last-minute we throw it all out the window and say, "We can't do that now...not a good time."

It's like having a blow out on the highway and saying it's not a good time to pull over. Stop causing even more damage to the system by delaying what must be done and just DO IT. The country will survive the pinch.

they made a deal, they should stick to the deal.

they suck.

AdamT said:

How would WWII have worked out if we'd had a balanced budget amendment?

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Are you SERIOUSLY comparing TARP, stimulus, the 2000 census, foreigh aid or "nation building" in Iraq/Afghanistan with WWII? Perhaps cuts in, rather than ads asking for more, SNAP applications, would be a better strategy in "hard times". During WWII rationing of many items was done almost VOLUNTARILY nationwide to help with our war effort. That debt was also paid off very rapidly. There is now a permanent gov't dependent underclass of about 15% of our nation's population that are virtually DEMANDING that they be given better FREE medical care in addition to all their other free benefits. How many illegal aliens did this nation "ignore" during the WWII era? When times get tough, the NATION must work together to set PRIORITIES. The idea that we need a NASA art program, GSA parties, "experimental" development of green energy trinkets and a cowboy poetry festival funded by borrowing money from future generations is INSANE.

AdamT said:

How would WWII have worked out if we'd had a balanced budget amendment?

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It wouldn't. Trying to substitute a constitutional requirement in place of an unwillingness among political leaders to make tough choices won't work. Such requirements would either be circumvented or they would be so rigid that the nation would find itself handcuffed in cases where fiscal flexibility is required. I don't support such an amendment. The example of the states provides one illustration of the limitations of such a device.

solution: Congressional term-limits.

Mark my words, Democrats will get tax cuts eliminated without a single spending cut. And it's doubtful those cuts were ever real spending cuts anyway.

donsutherland1 said:

possibly starting with a macroeconomically painless increase in the Social Security eligibility age

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I am not convinced that increasing the eligibility age is as painless as it seems. There is evidence that suggests that the lowest income representation of S.S. also has the lowest probability of actually living to see any disbursements. Of course we can confirm this logically due to the relationship between income (or wealth) and life expectancy in the U.S. IMO, it would be more appropriate to means test all increases in the eligibility age.

ttwtt78640 said:

Are you SERIOUSLY comparing TARP, stimulus, the 2000 census, foreigh aid or "nation building" in Iraq/Afghanistan with WWII?

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Obviously not. Did I say anything about TARP, stimulus, etc.? No, I asked what would have happened during WWII if we'd had a balanced budget amendment. Because when you pass a constitutional amendment it doesn't just apply this year, or next year. It's something that's very hard to get rid of once you've passed it. So, God forbid we should get into a major war sometime in the next 10 or 50 or 100 years, or have to face a huge natural or unnatural disaster and have to deal with a constitutional crisis because some nimrods in 2013 passed a short-sighted amendment that ties the government's hands.

American said:

Mark my words, Democrats will get tax cuts eliminated without a single spending cut. And it's doubtful those cuts were ever real spending cuts anyway.

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They certainly could if they wanted to, since the tax cuts expire of their own accord. But that won't happen.

Kushinator said:

I am not convinced that increasing the eligibility age is as painless as it seems. There is evidence that suggests that the lowest income representation of S.S. also has the lowest probability of actually living to see any disbursements. Of course we can confirm this logically due to the relationship between income (or wealth) and life expectancy in the U.S. IMO, it would be more appropriate to means test all increases in the eligibility age.

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You raise an important point and I'm not averse to the idea of means testing for Social Security and even Medicare among various options to reduce their long-term imbalances. I believe either Paul Krugman or Joseph Stiglitz have discussed that issue you raised.

In any case, I should have been more specific. By macroeconomically painless, I was referring strictly to the impact a gradual increase in the age of eligibility would have on personal consumption expenditures. Such a move would have a much smaller potential contractionary impact than immediate spending reductions or tax hikes, even as it would have a meaningful impact in reducing the nation's present value long-term liabilities.

AdamT said:

They certainly could if they wanted to, since the tax cuts expire of their own accord. But that won't happen.

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Of course it won't happen since the tax rates for the BOTTOM income bracket would go up 50%, by returning to the "Clinton" tax rates that YOU say that you want. This is what YOU and other lefities can not UNDERSTAND as you rant that "the rich" got all the big breaks. That is the BIG LIE about the "Bush" tax cuts. Obama and the left like MOST of these tax cuts, they seek only to soak "the rich" and continue with more income redistribution schemes, and other "social justice" nonsense, in the name of "fairness".

donsutherland1 said:

You raise an important point and I'm not averse to the idea of means testing for Social Security and even Medicare among various options to reduce their long-term imbalances. I believe either Paul Krugman or Joseph Stiglitz have discussed that issue you raised.

In any case, I should have been more specific. By macroeconomically painless, I was referring strictly to the impact a gradual increase in the age of eligibility would have on personal consumption expenditures. Such a move would have a much smaller potential contractionary impact than immediate spending reductions or tax hikes, even as it would have a meaningful impact in reducing the nation's present value long-term liabilities.

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The means testing idea is a good one for SS/Medicare perhaps with a limit of 250% of the maximum SS benefit as the "test". The increasing of the retirement age, however, ignores an important FACT. While SOME jobs are able to be done by people over 70, many are not, so as you raise the MINIMUM retirement age you drastically increase those that would qualify for much HIGHER benefits by attaining a "disabled" status. Allowing a construction trades worker to retire at age 65-69 makes SENSE, but raising that age a bit would give many of them a 30% RAISE in their INITIAL SS benefits as they can then legitimately claim to be "disabled" from working in that profession. Lifting the current wage cap is another thing that would extend the viability of the SS/Medicare system, with little pain being inflicted on the affected workers (except for those "self-employed"). Obama, however, did the DUMBEST thing possible, which was the "temporary" cut in ALL FICA withholding taxes. Yes he did!

ttwtt78640 said:

Of course it won't happen since the tax rates for the BOTTOM income bracket would go up 50%, by returning to the "Clinton" tax rates that YOU say that you want. This is what YOU and other lefities can not UNDERSTAND as you rant that "the rich" got all the big breaks. That is the BIG LIE about the "Bush" tax cuts. Obama and the left like MOST of these tax cuts, they seek only to soak "the rich" and continue with more income redistribution schemes, and other "social justice" nonsense, in the name of "fairness".

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The tax RATES at the bottom would go up, but they'd still pay little if any tax due to credits.