Congress Has Not Passed A 2014 Budget, and Probably Won’t

By :: March 25th, 2013

You probably read stories over the weekend about how the Senate passed a 2014 budget just before dawn on Saturday morning, a day after the House passed its version. The Senate action got particular attention since it was the first time in four years that the self-proclaimed World’s Greatest Deliberative Body actually approved a comprehensive annual budget of any kind.

Is this an opportunity to rejoice? Does it mean Congress may actually fulfill its constitutional duty and enact a fiscal plan this year? Does it open the door to a long-awaited tax reform?  Sadly, the answer is almost surely no.

The philosophical gaps between the House and Senate versions are massive even though in many cases, the dollar differences seem bridgeable. The House aims to balance the budget within a decade. The Senate has no such goal. The House would make major cuts in planned spending for health, income security, transportation, education, and community development. The Senate would boost some domestic spending and aim most of its reductions at the military budget.

The Senate would increase taxes by nearly $1 trillion over 10 years. The House would not increase revenues by a dime, relative to the Congressional Budget Office’s projections.

And that, ultimately, is where the fiscal policy debate will go aground. President Obama has said he’d support changes to both Medicare and Social Security if the GOP would agree to some new revenues. Most House and Senate Democratic leaders have said they’d go along, though reluctantly. Even some Senate Republicans have hinted that they could sign on to such a deal. Splitting the difference between $1 trillion and zero would probably do the trick.

But House Republicans have not budged. And as long as their position is that no tax increase of any size under any circumstance is acceptable, there will be no final budget resolution for 2014. At the moment, neither House nor Senate leaders plan to even try to reconcile the two budgets.

And without a compromise resolution, it is hard to image that either the House Ways & Means Committee or the Senate Finance Committee would propose a tax reform bill—even though both budget bills contemplate major reductions in tax preferences.

Tax reform is one of those issues where both sides know where they want to go, but nobody wants to take the first step. While Ways & Means panel chair Dave Camp (R-MI) dearly wants to rewrite the revenue code, it is hard to imagine he’d be willing to stick his head above the trenches and propose reductions in popular tax preferences for mortgage interest, employer-sponsored health insurance, or charitable giving.

Indeed, he’d be foolish to do so since it would only invite the predictable attacks on those changes by the interests that benefit from the current law, a barrage of criticism that would only make future reforms more difficult.

Besides, while the House budget proposed massive changes in the tax code through cuts in both rates and tax expenditures, it anticipates no net change in projected revenues. Thus, Camp could hit the required revenue number by doing…nothing.

The Finance Committee was instructed by the Senate to raise $975 billion in new revenues. But if Congress never agrees to a final budget resolution, the next step in the fiscal process--budget reconciliation--never happens. And if there is no reconciliation, there is no requirement that the tax-writers find those new revenues.

Thus, we can look forward to another year of stalemate. Yes, lawmakers will have to finesse another debt limit crisis this summer, and they’ll have to pass a stop-gap funding bill by Sept. 30 to keep the government running in fiscal 2014. But absent some totally unexpected event, the non-binding  resolutions approved by the House and Senate last week will be the end, not the beginning, of this year’s budget process.

They will accomplish only one thing: Legislation passed earlier this year required the House and Senate to pass budget resolutions before April 15 or lawmakers would have their pay docked.  Now, they will get paid.

36Comments

  1. SteveinCH  ::  9:05 am on March 26th, 2013:

    And I repeat, it is helpful to frame the numbers in some way differently than relative to an artificial baseline. Here’s my view of it.

    http://uspoliticaleconomics.blogspot.com/2013/03/a-budget-comparison.html

    In my view, that’s the way the data should be presented. This dollar change relative to a baseline nobody can understand is not a helpful framing for anyone other than budget wonks.

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  3. Michael Bindner  ::  5:46 pm on March 26th, 2013:

    These were both for show, since the Budget Control Act spending caps provided adequate direction to the Appropriations Subcommittees. I am not so pessimistic about the ability of the Revenue Committees to act on tax reform without Reconciliation instructions, although I would rather they not do so, because no one is talking about the long term reform that would most help entitlements – moving the money gained from the mortgage interest deduction to a refundable tax credit for children payable with wages or benefits of about $500 per child per month (if not $1000).

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