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This Week's "Fiscal Fitness"

28 Jan 2008
Posted by Stan Collender

Here's my column from the January 29, 2008 edition of Roll Call.

Stimulus Is Get Out
Of Jail Free Card for
White House, Congress


If you need to be convinced how quickly the stimulus bill now working its way through the legislative process has changed this year’s budget debate, just think about this: Four weeks or so after President Bush had a take-no-prisoners attitude and absolutely demanded that Congress reduce its proposed spending by $22 billion, he not only is one of the sponsors of legislation that will increase the deficit by $145 billion, he is actively pushing for its enactment.

But that’s hardly the only sudden and dramatic change. The perceived need at the White House and on Capital Hill to use the federal budget to stimulate the economy has altered this year’s debate to the point that what virtually everyone was assuming a week or so ago no longer applies.

The best way to think of the stimulus bill is as the federal budget debate’s equivalent of a ”Get Out of Jail Free” card. Just like in Monopoly, Congress and the Bush administration will be able to do almost anything without landing in ”jail,” that is, without worrying about the political consequences.

For example, one of this year’s most anticipated legislative battles -- the fiscal 2009 budget resolution -- has likely now been reduced to a nonevent.

By the time the resolution is considered this year, either a stimulus bill already will be enacted or the legislative process will have progressed so far that its impact on the deficit and economy will be assumed in what’s drafted by the budget committees. That will make the budget resolution more of an accounting of what has already been agreed to than a statement about what policy should be.

That means Republicans and Democrats will have trouble creating separate positions on the budget, and that in turn will take much of the political heat out of a debate many had expected to produce banner headlines.

Even though the stimulus will mostly affect fiscal 2008, some of the tax cuts and spending increases that will be included in the bill will spill over to 2009. As a result, it’s hard to see how the fiscal 2009 budget resolution that will be considered this year will include any serious talk about deficit reduction, let alone an actual plan. Spending cuts and revenue increases that would lower the deficit in 2009 will be said to reduce the promised positive impact of the stimulus. That simply won’t be acceptable in an election year.

For the past month or so Congressional Democrats had been talking about passing a budget resolution this year with reconciliation instructions so they could prevent filibusters in the Senate on some of the legislation they want to pass. (Reconciliation bills, which can only be considered pursuant to instructions included in a budget resolution, only require a simple majority and have a statutory limit on debate.) Democrats saw reconciliation as the ideal way to avoid some of last year’s most difficult political bottlenecks and to take away one of the most effective legislative tools available to Republicans.

That strategy would have made the debates on the budget resolution and the reconciliation bill (or bills) among the most difficult of the year. But with the resolution largely meaningless and the need for revenue offsets in 2009 effectively eliminated, the reconciliation strategy that seemed so obvious only a few weeks ago may already be a distant memory.

The stimulus bill also takes away all of the political problems with the ”pay as you go,” or PAYGO, rules that haunted Congressional Democrats last year. Once they had made the pledge to reimpose the rules Republicans let lapse and offset the deficit impact of revenue reductions and mandatory spending increases, Democrats found it hard to come up with politically acceptable revenue increases and spending reductions that would satisfy the PAYGO requirements.

But the stimulus bill, or rather the White House/House bipartisan agreement to provide a fiscal stimulus, means that there is also an effective agreement not to impose those rules because doing so would eliminate the presumed positive impact of what will be enacted.

This could mean that another one-year patch, or perhaps even a permanent fix, for the alternative minimum tax could be enacted this year with little or none of the controversy that delayed its adoption last year. Why not move ahead with the AMT fix while PAYGO effectively has been suspended? Does anyone really expect that Congress and the White House will allow the AMT to raise taxes next year when the economy might be shaky for millions of taxpayers who consider themselves middle class?

All of this is not to say that there will be no budget disputes. I’m still expecting, for example, that, like last year, the Bush budget will propose a level for domestic appropriations that will be difficult for Congressional Democrats to live with. There could be a veto or two of a continuing resolution. And there will also almost certainly be a big fight over the supplemental appropriation for Iraq and Afghanistan we already know is coming in the spring.

But because of the ”Get Out of Jail Free” card provided by the stimulus bill, the president and Congress will have a way to move from the positions they took last year on taxes, spending, and the deficit, and to avoid the biggest budget fights that only a few weeks ago seemed certain to occur.

In Monopoly terms this will mean that, no matter where there are on the board, they will be able to move directly to “Go.” The only difference? Instead of the $200 provided by Monopoly, they will be providing $300 per taxpayer.

Thank you very much for this

Thank you very much for this information.




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