By David Cohen
A specter runs across Congress. It’s the pending end of session crash and explosion, louder and more destructive than ever. If the Tea Party has its way, imposing its ideology on all, there won’t be any lame duck session.
This crash and burn could lead to a shuttered government and severe damage to an already weak American economy.
The Grand Alliance between the Tea Party and Grover Norquist is anchored in no new taxes and deep spending cuts. Norquist is the Godfather of the No Tax Increase pledge by Republicans.
So far the House and Senate Congressional leadership has allowed itself to be handcuffed by Norquist and the Tea Party. Presumptive Republican presidential nominee Mitt Romney looks on as a silent enabler.
1. Where We Are
Congress is supposed to enact 12 Appropriations Bills before the fiscal year ends on
September 30. In recent years it has not, and Congress has passed routine continuing spending resolution, mostly at the spending level of the previous year for those appropriations not resolved.
That’s how most of the appropriations measures are dealt with. The process usually leads to heated political rhetoric and lots of “harrumphing,” but nothing seriously harmful happens. The government continues.
At this point, Congress has not passed a single one of the appropriations bill and is not likely to by the September 30 deadline.
Continuing government funding at last year’s levels does not satisfy the Tea Party ideologues. House Speaker Boehner and Senate Minority Leader McConnell are tied up in knots because they cannot work with Democrats to produce a compromise while leaving Republicans in the House and Senate sharply divided.
At the same time, for political reasons the Republican Congressional leadership does not want the Federal government to shut down either right before the election or on December 31. It’s happened before and most independent voters blame the Republicans
That’s not all. Looming over the Congress are additional important matters that will have a major impact on our economic life whether or not there is a lame duck session.
1. Bush Era Tax Cuts: These were created in 2001 and 2003. They were scheduled to expire in 2010. Congress extended them until December 31, 2012. So December 31st is the deadline date.
2. The Debt Ceiling: U.S. debt will rise above the legal limits, if not extended before the end of the year. In earlier Republican and Democratic administrations this was a routine act. In the past all agreed that the U.S. government’s full faith and credit should not be breached. That enabled the U.S. government to do what government’s do: establish the power to borrow.
3. Sequestration. This budget mechanism forces mandated domestic and military cuts unless there is an agreement on how to move forward with prudent spending cuts, tax revenue increases and a lifting of the debt ceiling.
4. A series of usual end-of-year items: Deciding whether to extend emergency unemployment benefits, the payroll tax holiday, extending parts of Temporary Assistance for Needy Families, the reimbursement rate for doctors who treat Medicare patients and alternative minimum tax exemptions.
5. Other bills unlikely to be completed before the election: Farm bill, postal service reform, cyber security, legalizing on-line gaming.
II. What To Look For
Right now Republicans and Democrats support the idea of extending the tax cuts for families earning $250,000 per year or less and for individuals earning $200,000 or less. The other issues could then be argued. Getting this resolvable issue out of the way on what would probably be a near unanimous vote in the House and the Senate is not likely to occur. The political fissures are so deep that what might be easily resolved defies resolution. It is not a political situation that allows for a rational solution.
President Obama and Congressional Democrats are hanging tough on not extending the Bush Tax cuts to those over $250,000. The President drew the line even though some Democrats want him to exempt people up to $1 million of income. The President, not wanting to step on his message, or lose the revenues, has thus far stuck to his guns.
The first thing to look for is whether or not the President and Congress continue to hold to their tax positions. Another question is whether the President continues to articulate the case for why the wealthy should pay more taxes.
The second thing is whether there will be any Republican office holders, including Governors whose states are hurting, willing to step up and advocate additional funding for state infrastructure, education and safety net needs, including Medicaid. So far the silence is deafening.
Meanwhile the pressures to avoid the sequester on defense spending will produce an outpouring from what President Eisenhower warned us against: the insatiable greed and power of the military-industrial complex. The Aerospace Industry, calling in Field Marshal Dick Cheney, has deployed its lobbyists to Capitol Hill to make the case for exempting the military from automatic cuts, with the clear implication that all the cuts should come from the domestic side.
There can be no budging on sequestration until significant taxes are recaptured by having those who can afford to pay more actually do so. Those advocating no military cuts so far have not made progress among those who are willing to deploy the sequestration tool to produce a balanced outcome.
III. Lame Duck (post-election session of Congress)
Notwithstanding the Tea Party’s desire to avoid a lame duck session by putting off issues into what they hope will be a more Republican political scene in 2013, there is so much unfinished business that a post-election session will begin one week after the election on November 13. It has to end no later than January 1, when the 113th Congress will begin.
The issues in the lame duck session will be fought over in the context of who controls the White House and Congress in 2013. National Journal, the well respected publication, posited five Scenarios:
In this political context, there are two scenarios that deal with fiscal instability:
Allow the Bush tax cuts to expire, end emergency unemployment benefits, end the payroll tax holiday and end alternative minimum tax exemptions. With the mandatory non-defense and defense cuts, that’s full scale sequestration.
The likely result is that the deficit is reduced but that the economy takes a hard hit, probably moving the country back into recession.
Another approach is to maintain the status quo for yet another year. That approach is considered fiscally untenable, although the details of it matter.
What National Journal calls the “tempered approach” represents the middle way. Again, the details matter in such a “middle way.” What will the mix be between spending cuts and revenue increases? With the deficit widened in 2013, what is the pace for reducing the deficit? That is where the details matter.
IV. Public Actions
The election is the key variable. Major Garrett, National Journal’s respected analyst, gives a greater chance for a Republican Congress and an Obama win than the status quo political balance or a Democratic Congress in an Obama second term.
A Romney win has a greater chance of producing a Republican Congress than a divided one.
While a Romney win likely leads to a Republican Congress, Congress nevertheless has many more variables. Given what the polls show, the robust Obama field operation, also known as the ground game, may cause serious divisions among Republicans, I would argue that, if Obama wins (a) the Democrats have a decent chance to increase their Senate numbers and (b) win the House or reduce Republican margins.
This Democratic triumph would influence the details of the lame duck session and the new Congress. It is likely to lead to tax cuts for those under $250,000 retroactive to January 1, restoration of emergency unemployment benefits, restoration of the payroll tax holiday, and continuation of the Alternative Minimum Tax exemptions.
If Republicans win, they are likely to carry out their promises: increase defense spending, cut the social safety net and reduce taxes on the wealthy. A move to focus the sequester on non-defense programs is also likely, creating a hard future of sacrosanct defense spending and the safety net permanently tattered.
Whether matters are settled in the lame duck session or not, the election will determine whether the Cheney vision reigns supreme, or a “tempered approach” with a reasonably balanced approach will be the order of the day.
I see three other hopeful signs that strengthen our position.
1. In the House, Defense Appropriations legislation was cut by $1.1 billion to freeze military spending at last year’s level. This was a bi-partisan amendment led by Mulvaney (R-SC), a card carrying conservative, and one of the House’s most liberal members, Frank (D-Mass). Eighty eight Republicans joined Mulvaney. It is possible to break through the deadlock in Congress.
2. The AFL-CIO, Service Employees Union, Demos and the Center for Community Change will establish a political platform that is designed to hold candidates accountable. On the issues dealing with allocation of financial resources, and the accountability of the private sector, this document will set a standard in addition to articulating a vision of the common good.
3. Bend the Arc, a Jewish social justice group, will lead a campaign beyond the Jewish
community on behalf of increased taxes. This effort will be grass roots oriented and
confrontational with elected officials where it makes strategic sense to add visibility into these efforts.
The Lame Duck session will provide the best setting to link domestic and military issues as part of resource distribution. That changes the political context in which these issues will be considered.
That is something to look forward to, although with great trepidation as to the outcome.