StanCollender'sCapitalGainsandGames Washington, Wall Street and Everything in Between

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Posted by Stan Collender

After almost 8 years of being a standalone blog, Capital Gains and Games will now be published by Forbes.

I will continue to write CG&G and will do so with total independence. Forbes is interested in having the exact same type of analysis and information CG&G has always provided to its readers. What I write will not be reviewed or approved by anyone before it's posted. I have total freedom to be as snarky as I have been in the past.

The only thing that will change is the name. In keeping with Forbes policy, the blog will be published under my name rather than as Capital Gains and Games.

CG&G's archives will remain where they are right now. You'll still have access to every post that Troy Schneider, Andrew Samwick, Pete Davis, Bruce Bartlett,  Gordon Adams, Ed Andrews and Dan Rosenthal and I published on CG&G right here at

Posted by Stan Collender

I'll have a very exciting announcement about CG&G's next step before the Obama budget is released next Tuesday.

Watch this space.

Posted by Stan Collender

It had almost no chance of being enacted anyway, but the comprehensive tax reform proposal that will be revealed by House Ways and Means Committee Chairman Dave Camp (R-MI) this afternoon kills even the very limited possibility that something will happen on taxes this year.

It also very likely kills the chance of tax reform in 2015 and 2016.

The reason is simple: The plan includes tax increases on key Republican constituencies. No matter how rational that might be from a numerical point of view, that's not something Camp's colleagues will be able even to tacitly approve let alone actually vote for before either the next congressional election this November or the next presidential election in 2016.

Posted by Stan Collender

We used to say that a president's budget wasn't worth the paper on which it was printed. These days we say the same thing a bit differently: the president's budget isn't worth the memory needed to store it on your computer.

Either way you have to ask why the White House should even bother?

Take what's happening with the 2015 budget, for example.

As reported by The New York Times and others, last week's big budget news was that the Obama administration's fiscal 2015 budget will not include the proposal made last year to change the way the annual Social Security cost-of-living adjustment is calculated.

That was covered as a typical politically red-hot inside-the-beltway story: the White House decided not to hand congressional Republicans an election year issue and congressional Democrats were breathing a huge sigh of relief because of it.

Posted by Stan Collender

Last week's news reports about congressional (actually...congressional Republican) action on the debt ceiling did what in the journalism business is called "burying the lead," that is, the stories typically didn't start with the most important part of what happened.

To a certain extent that wasn't surprising. As most reports said, the GOP folded its debt ceiling tent and went home. Three years after Senate Minority Leader Mitch McConnell (R-KY) began to insist that Congress would never allow the  government's borrowing limit to be raised again unless Republicans got something something in return, and long after House Speaker John Boehner (R-OH) said there would be no debt ceiling increase unless he got a dollar in spending cuts for every dollar of increased borrowing authority, congressional Republicans allowed the government to borrow more without getting anything from the White House and congressional Democrats.

Posted by Stan Collender

It's a very (at least by Washington standards) snowy day in and around the beltway, so what better time than to demonstrate the extreme (bordering on the ultra) hypocrisy these days that exists when it comes to the federal budget. All of these seemingly unrelated events and announcements took place over the past four weeks.

Posted by Stan Collender

In case you missed it, the FY2014 omnibus appropriation, which will keep the government funded through the September 30, that is, through the end of the fiscal year, passed the Senate yesterday 72-26. It was adopted by the House the day before 359 to 67.

Here are the five quick reasons why the votes were so big and bipartisan.

1. The GOP is still hurting from the October government shutdown. There's no doubt that the negative political repercussions from being blamed for this October's two-week shutdown is haunting House Republicans. As happened after the 1995-1996 shutdowns when congressional Republicans took it on the chin politically, the chances of a shutdown being threatened again any time soon are now significantly lower than they were several months ago and the omnibus was the first opportunity for the House GOP leadership to take advantage of this new sentiment.

Posted by Stan Collender

Keep these things in mind if you're thinking about popping a cork or two to celebrate Congress passing an omnibus appropriation over the next week that will keep the federal government open for business through the rest of fiscal 2014:

Posted by Stan Collender

This is the week when the-year-in-review stories start to be published.

I've always found those recaps to be largely irrelevant. If something significant happened this past year you likely already know or remember it without it being included on a top 10 list. And if you don't remember could it really have been that noteworthy?

Besides, when it comes to the federal budget, nothing that happened -- including the much-ballyhooed-but-actually-totally-inconsequential end-of-year deal -- was so important that it merits further discussion.

My overwhelming preference is to look at what's ahead rather than at what's already occurred. With that in mind, here are my top five budget predictions for 2014.

Posted by Stan Collender

Don't believe what you may have heard elsewhere about the budget deal. Here's the truth.

Myth #1: This prevents another government shutdown.

The deal may make a shutdown less likely, but it absolutely doesn't prevent one from happening.

Shutdowns occur when there is a lapse in appropriations, that is, when an existing appropriation expires and no new appropriation is enacted to replace it. This deal raises the ceiling on the amount that may be appropriated, but it does not actually appropriate anything.

There still could be, or likely will be, a fight in January over the amount being spent and what it is being spent on when the widely expected omnibus appropriation is debated. The deal provides a ceiling on the amount that may be spent rather than a guarantee and some members of Congress will want to re-litigate the increase that was negotiated in this agreement. Others will threaten to vote against the omnibus because they disagree with the bill's priorities.

Myth #2: Congress has now passed a budget for the first time in years.

Posted by Stan Collender

In a post several days ago, I listed House Budget Committee Chairman Paul Ryan (R-WI) as one of the losers of the budget deal because it hurt his chances to become the GOP presidential nominee in 2016.

It now appears that Ryan agrees with that assessment. Yesterday, Ryan said publicly for the first time what many had been speculating privately for some time -- that he wants to be chairman of the Ways and Means Committee rather than president. He plans to pursue it when the current chairman -- Dave Camp (MI) -- is term-limited out of the post at the end of 2014.

Posted by Stan Collender

It's been less than a week since House Speaker John Boehner (R-OH) surprised the political world by publicly and directly taking on the right wing groups -- and, by inference, the tea party wing of the GOP -- two days in a row. He then openly defied them by allowing the House to vote on a budget deal that was a compromise with Democrats they didn't like.

Four days later the question is whether this was a permanent change for Boehner. Will he continue to tell the tea partiers in his caucus, the Club for Growth, Heritage Action and the others he so resoundingly criticized that they can go to hell, or was this a one-time event not likely to be repeated?

The indications are that this was a not permanent change in the speaker's political testosterone level. Here's why.

Posted by Stan Collender

Regardless of whether it's actually adopted, five individuals, groups and organizations stand out as being the biggest losers from the budget deal announced Tuesday evening. They are:

1. Fix The Debt. FTD is the high-profile corporate-funded organization that has been pushing hard for a grand bargain dealing with the long-term budget issues. In spite of the statement FTD issued, this deal was a total rejection of what FTD has raised and spent so much money trying to get Congress to do. You might even call it a smackdown. Not only will there be no Fix the Debt-preferred agreement in 2014, the deal closes the door on that type of agreement in 2015 as well. And does anyone really think Congress is going to take on Social Security and Medicare just before the 2016 presidential election?

Posted by Stan Collender

The big budget question for this week is whether the budget conference committee will be able to agree to anything by its deadline this Friday.

My big budget answer: It doesn't matter.

Here's why.

1. The budget world won't end at midnight this Friday. The government won't shut down, the debt ceiling won't be breached and no sequester will occur. So there's no immediate practical impact if the conference committee fails to come up with anything. It would not be at all surprising, therefore, if at some point this week the committee announces that it will continue its deliberations when Congress returns to Washington in January.

2. Even if the conference committee does agree to something this week, there's only a limited chance that the deal will actually be voted on by one or both houses. If it happens at all, it will happen in January.

Posted by Stan Collender

No...I'm not reporting that the Obama administration's fiscal 2015 budget, which by law is supposed to be sent to Congress by Monday, February 3, 2014, will be late. Neither the White House nor the Office of Management and Budget have made any such announcement and I seriously doubt they will any time soon.

Yes...I'm predicting, based on my reading of the budget tea leaves, that the Obama 2015 budget will be seriously late.

The reason is how long it's taking Congress to deal with 2014.

The only real question in my mind is how late the Obama budget will be. My guess is not only won't we see it before the end of February but that the end of March or later is a real possibility.

Although the process by which the president's budget is put together starts much earlier in the year, the vast majority of big decisions typically are made in the fall, that is, after Congress has completed work on the current year budget and appropriations and other decisions can be taken in to account and reflected in the administration's plan.

At least that's the way it's supposed to work.

Posted by Stan Collender

One of the ideas discussed during the fiscal cliff debacle in late 2012 and early 2013 to deal with the GOP's intransigence on raising the federal debt ceiling was the platinum coin trick.

The idea was pure genius. Using previously-granted legal authority, the Treasury would mint a platinum coin with a face value of $1 trillion and would sell that coin to the Federal Reserve which would then credit the U.S. government with the cash. That would eliminate the need for additional government borrowing any time soon and...presto...the White House's debt ceiling problem would go away.

The White House eventually said no to the platinum coin trick by saying that it didn't have legal authority to do the sale. It also became apparent when the administration rejected the other debt ceiling escape hatches like the 14th amendment that the White House's political strategy was to keep the pressure on congressional Republicans by making them deal with the one and only debt ceiling process: voting on it.

Posted by Stan Collender

The budget conference committee that's been meeting sporadically since last month was given until December 13, that is, until a week from this Friday, to agree on some kind of deal.

So what happens if there is no agreement by December 13? 

Absolutely nothing.

Like Seinfeld, which was a TV show about nothing, December 13 is the budget deadline that's about nothing.

Yes, there will be headlines about how another budget-related committee, task force or working group -- think about the Bowles-Simpson (or BS) commission, the anything-but-super committee, and all of the other botched negotiations that have taken place the past few years -- has failed. That's bound to hurt a congressional approval rating that last week fell to its lowest level in history (see question 3) and doesn't have much further to fall.

Posted by Stan Collender

I've been talking for months about how the Grand Bargain or Big Deal that's always mentioned whenever there are budget talks in Washington won't happen until 2019 at the earliest.

I first posted about 2019 in June and have mentioned it a number of times on television and radio and in speeches since then.

I've also been told that my analysis recently made the big time when a group of the most senior tax lobbyists in Washington discussed it at a private meeting (It's not clear whether they were happy about having six more years to work on issues or sad that nothing much would be done before the end of this decade at the earliest).

Each time I've talked about 2019 I've gotten reactions that range from shock to amazement. No one ever tells me I'm wrong; they just shake their heads in disbelief.

So once again, here's are the top 10 reasons we're likely facing six more years of crisis-by-crisis budgeting in Washington and no Grand Bargain any time soon.

Posted by Stan Collender

By changing it's rules yesterday to prevent filibusters on executive branch and judicial nominees (other than the Supreme Court) -- the so-called nuclear option -- the Senate further complicated a federal budget debate that was already overly complicated and had little chance of success.

Although it's still less likely than likely, the prospects for a government shutdown in January increased significantly. Based on yesterday's action, I have increased the possibility that funding for the federal government will not be adopted by the time the current continuing resolution expires to 40 percent.

And the likelihood for sequestration to occur as scheduled in mid-January also jumped significantly.

Here's why.

1. In general terms, the federal budget debate in recent years has always been more emotional than rational and far more political than substantive. The emotions and politics were significantly ramped up yesterday.

Posted by Stan Collender

Eminent economist Martin Feldstein, former chairman of the Council of Economic Advisors during the Reagan Administration, had an op-ed in The Washington Post earlier this week that shows he just doesn't understand what's happening with the budget conference.

Here's the money quote:

The key to a political compromise is to recognize that raising revenue does not require increasing tax rates. Substantial revenue could be raised by limiting the government spending built into the tax code."

Feldstein accurately notes that this would give congressional Democrats enough of what they want in a budget deal to agree to changes in mandatory programs, especially "slowing the growth of Social Security and Medicare."

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