StanCollender'sCapitalGainsandGames Washington, Wall Street and Everything in Between



Instead Of Fiscal Cliff, Call It "Cliffgate" 2014

14 Jun 2013
Posted by Stan Collender
Last year's high-stakes, Perils-of-Pauline-like event known as the "fiscal cliff" (thank you Ben Bernanke for that label), was the federal budget debate's version of a scandal.
 
Members of Congress playing chicken with the government's finances, through a series of man-made fiscal disasters -- automatic tax increases, automatic spending cuts, allowing the debt ceiling to be reached, etc. -- was the height of irresponsibility.
 
So now, in addition to Watergate, Monicagate, and all the other Washington disgraceful events that have been similarly labeled, it's time to start calling what happened last November and December something new. "Fiscal cliff" is way too benign; the correct pejorative label is "Cliffgate."
 
Why bring this up now? We're looking a new fiscal cliff, that is, yet another cliffgate, later this year.
 
The Congressional Budget Office this week issued a short report showing that the so-called "extraordinary measures" -- what the U.S. Treasury does to manage cash and avoid default when the debt ceiling is reached -- will last until late October or early November.
 
In one sense the CBO analysis is good news because the date is much later than had been projected earlier in the year. But it's also bad news in the sense that the same end-of-year budget scenario that was so destructive in 2012 is starting to emerge again in 2013.
 
Here's what I'm expecting.
 
1. No more than one or two (and even that may be very optimistic) of the 2014 appropriations will be enacted by the start of the fiscal year on October 1. As has become standard practice, that will require Congress and the president to enact a continuing resolution or face the possibility of a government shutdown.
 
2. A CR will be enacted by the end of September, but it will only last for a few weeks. The plan will be to time the end of the continuing resolution to the date when the extraordinary measures will run out and a debt ceiling increase will be needed.
 
3. The White House will refuse to negotiate over the debt ceiling and, as it has been saying for weeks, will insist that the bill be "clean" and have no other provisions.
 
4. In spite of the White House's huffing and puffing, House Republicans will pass a debt ceiling that is anything but clean. Senate Republicans will prevent a debt ceiling from being considered there at all by requiring 60 votes.
 
5. Some kind of negotiations will begin over appropriations spending levels. Medicare and Medicaid will not be included in these discussions. Democrats will insist on keeping to the levels agreed to for fiscal 2014 in the Budget Control Act -- the law enacted in August 2011 that created the anything-but-supercommittee, spending caps through 2021 and the sequester. The GOP will insist on reducing spending below the existing cap for 2014.
 
6. A major fight will be over the spit between military and domestic spending because, unlike the situation 2013, the law gives Congress and the White House an increased ability to shift funds between the two categories.
 
7. Nothing will be resolved by the time the extraordinary measures run out and the first CR expires. With Thanksgiving approaching and members of Congress eager to get home, a second CR and a short-term increase in the debt ceiling will be enacted until January 15, 2014. That's the date when a sequester will occur if spending exceeds the cap.
 
8. And that's what will create Cliffgate 2014. 

Thank you for this article.

Thank you for this article. What is scary is how plausible this is. The next level of sequester cuts is around 15% (if I recall) and will do real damage, killing jobs, shutting down government, and doing real damage to the economy.

Of course, this strategy could do damage to the Republicans at election time. Because they want so badly to oppose the President, they don't care about doing what's best for America. Hurt the economy and elect a Republican President counts as a win to them.

Grrrrrr....


Nice to see the Optimistic Case presented

Wish I believed things will go that well.


It would be a rich irony if

It would be a rich irony if the long-term Republican plan to "starve the beast" of domestic spending actually starves US military adventurism, the one kind of deficit spending that most Republicans approve of.


Stan Collender, great job,

Stan Collender, great job, good post!




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