Spending Daily | January 24, 2013

Senate Budget Chair Spent 3 Weeks Studying the Pros/Cons of Crafting a Budget
Roll Call reports, “Three weeks ago, incoming Senate Budget Chairman Patty Murray, D-Wash., directed her staff to explore the pros and cons of actually crafting a budget resolution. … In the days before the New Year’s Day fiscal cliff deal, Murray still had not decided whether a formal budget process was the best way to articulate the Democratic Party’s position. … So when she tasked her staff to weigh the relative benefits of developing a budget, the major question she posed was whether the formal budget process was the best vehicle for Senate Democrats to ‘aggressively articulate a vision while putting us potentially on a path to bring this fiscal-debt-deficit debate to a close,’ one source said. Some sources familiar with the process said the hammering Democrats have taken for not producing a budget in more than 1,000 days did not factor into the decision, but at least one senior Democratic aide said the GOP barrage was one of three major reasons for Senate Democrats’ change of heart on the matter.”

House Vote to Extend Debt Ceiling “only a bandage covering a festering long-term fiscal problem”
McClatchy reports, “The House of Representatives voted overwhelmingly Wednesday to suspend the nation’s debt limit until May, allowing the federal government to continue to pay its bills and removing an immediate threat to the economy as it struggles to gain strength. The move, expected to be ratified by the Senate and signed by President Barack Obama, signaled that the government will not repeat the 2011 debt limit battle this month, a skirmish that frightened Wall Street and led to a downgrading of the nation’s credit rating and could have done so again. … But economists stressed that a short-term debt limit extension is only a bandage covering a festering long-term fiscal problem that Congress and the White House need to get a handle on to better instill confidence in the U.S economy. Congress still faces deadlines on the automatic spending cuts scheduled to take effect March 1 and must deal with the expiration of the continuing resolution appropriations measure to keep the government operating in March.”

Boehner Raises the Stakes with Balanced Budget Proposal
The Hill reports, “Speaker John Boehner’s (R-Ohio) pledge to back a Republican budget that balances within 10 years raises the political stakes for his party and sets up another major test of his leadership. Democrats eyeing a takeover of the House in 2014 view the move as a gift, since the GOP budget plan will likely make deeper cuts to popular government programs that any leadership-backed blueprint has before. …  The Speaker committed to a 10-year balanced budget on target on Tuesday to secure conservative backing for a short-term suspension of the debt limit. … ‘We’re committed to doing a budget and a 10-year plan to solve our budget crisis and to balance our budget. And frankly, I think it’s time for the Senate, and the White House, to produce a budget that will balance over the next 10 years.’ [the Speaker said.]“

Mafia Connections to Italian Renewable Energy Exposed in Sting
The Washington Post reports, “ Inside a midnight-blue BMW, a Sicilian entrepreneur delivered his pitch to the accused mafia boss. A new business was blowing into Italy that could spin wind and sunlight into gold, ensuring the future of the Earth as well as the Cosa Nostra: renewable energy. … The still-emerging links of the mafia to the once-booming wind and solar sector here are raising fresh questions about the use of government subsidies to fuel ashift toward cleaner energies, with critics claiming huge state incentives created excessive profits for companies and a market bubble ripe for fraud. China-based Suntech, the world’s largest solar panel maker, last month said it would need to restate more than two years of financial results because of allegedly fake capital put up to finance new plants in Italy. The discoveries here also follow so-called ‘eco-corruption’ cases in Spain, where a number of companies stand accused of illegally tapping state aid.”

Scarborough: National Debt a “Ticking Time Bomb” That Can’t Be Ignored
MSNBC’s Joe Scarborough writes for POLITICO, “As the president and his opponents prepare to scrap over social issues in circular debates that will produce far more heat than light, the possibility of an economic meltdown in America grows exponentially in these uncertain days because of the president’s aversion to arithmetic. Barack Obama and his party can no longer ignore the elephant in the room, particularly when that beast is becoming more bloated by the day. This feeding problem began under George W. Bush, who grew the national debt $6 trillion over two terms. Barack Obama did that and more in one. Unfortunately, his second inaugural address shows just how disinterested the Obama White House is in disarming the ticking time bomb that threatens our future.”

Ryan Vows to Press Ahead with Deep Spending Cuts
The New York Times reports, “Avoiding an economic showdown with President Obama, the House on Wednesday passed legislation to eliminate the nation’s statutory borrowing limit until May, without including the dollar-for-dollar spending cuts that Republicans once insisted would have to be part of any debt limit bill. … Instead, the next Republican showdown with the president will come in March, when the subject will be across-the-board spending cuts first and a possible government shutdown by the end of the month. ‘We know with certainty that a debt crisis is coming to America. It’s not a question of if. It’s a question of when,’ Representative Paul D. Ryan of Wisconsin, the Republicans’ vice-presidential nominee last year and current Budget Committee chairman, said as he vowed to press ahead with deep spending cuts.”

Credit Rating Agencies Cautious Over Debt Burden
The Wall Street Journal reports, “Moody’s Investors Service said the House vote to suspend the federal borrowing limit through May 18 would have no impact on the firm’s U.S. rating, which is triple-A with a negative outlook. The top factor for Moody’s rating is whether budget agreements to emerge from negotiations curb the U.S. debt burden over the medium term, said Moody’s top U.S. analyst Steven Hess. ‘This does nothing on that front other than to apparently force the Senate and the House of Representatives to come up with budgets. But what’s in those budgets is the important factor for us,’ Mr. Hess said. ‘We have never thought that the debt limit itself was a fundamental factor in our rating.’”

GOP Backing a $69 Billion Appropriations Cut
POLITICO reports, “Talk about déjà vu all over again. Fresh from their 2010 election victory, House Republicans wasted no time demanding $65 billion in cuts from discretionary spending, setting off an appropriations fight that only ended in April 2011 after narrowly avoiding a wartime government shutdown. Two years later, the GOP is back, endorsing a second, almost identical $69 billion appropriations cut — not because the party really believes in the reductions but because it’s looking for leverage to force President Barack Obama to accept alternative savings from benefit programs like Medicare, Medicaid and food stamps. … Discretionary spending for 2013 is now set at $1.043 trillion but would drop below $980 billion and quite possibly to $974 billion under automatic spending cuts set to take effect March 1.”

“Balanced”: Schumer Calls for $600 Billion Tax Hike to Offset Sequester
The Hill reports, “Sen. Charles Schumer (N.Y.), the Senate Democrats’ chief political strategist, sees a joint budget resolution between the Senate and House as the key to raising another $600 billion in new tax revenues. Democratic leaders say that will be the minimum amount needed from tax reform to stop automatic spending cuts to social and defense programs mandated by the 2011 Budget Control Act. The revenue would come from limiting deductions and closing loopholes and would affect only people earning above $250,000. President Obama has set the goal that additional deficit-reduction legislation should consist of a balanced or dollar-for-dollar ratio of spending cuts to tax revenues. … Democrats say any offset to the sequester must be divided equally between spending cuts and revenue increases, which means Republicans must agree to about $600 billion in tax increases to erase the sequester.”

“Both the Makers and the Takers Owe Us Entitlement Truths”
Major Garrett of the National Journal writes, “Entitlement spending across all federal programs, including transfer payments to alleviate poverty and provide disability subsidies, gobbled up two-thirds of all federal spending in 2010. … We spent $24 billion on entitlements in 1960 and nearly $2.4 trillion in 2010. According to American Enterprise Institute scholar Nicholas Eberstadt, from 1960 to 2010, inflation-adjusted entitlement spending grew by 5.2 percent annually. At the same time, real per capita income grew by 2.2 percent annually. We have, as a nation, been paying out much more than we have been earning for five decades. This is not a problem of ‘taking’ or ‘making.’ It is a problem of allotting. And if we don’t do something soon, we will be allotting more than the ‘makers’ can make, and the ‘takers’ will have much less to take.”

Stage Set for Serious Policy Debate on Entitlements
POLITICO reports, “A split is emerging between powerful Democrats, such as New York Sen. Chuck Schumer and Montana Sen. Max Baucus, over whether to employ controversial fast-track procedures to pave the way for a sweeping overhaul of the Tax Code that would presumably raise revenue to help slash future deficits. How the dispute is resolved will have dramatic implications for the contents of a final fiscal package. The dueling House and Senate budget resolutions could force the two parties into a serious policy debate over cuts to Medicare, Social Security and Medicaid — as well as whether to raise new taxes through a reform of the Tax Code — something that was largely avoided in the previous Congress. How this is resolved will define Obama’s second term in office and whether Capitol Hill can finally get a handle on its finances — or fall into yet another crisis.”