Why did normal order go away?

Later today the House is to vote on HR 325, a bill to suspend the debt limit until mid-May and then the debt limit will automatically be increased by the new debt incurred during the interim.* The idea is to take away the notion of defaulting and then move toward normal order budgeting (Senate and House do their thing, including instructions to committees for things like tax reform, health policy, etc.) and then they bang it out in a conference committee(s). Just a few thoughts:

  • Normal order (House and Senate doing their thing and having conferences) really stopped with the release of the Simpson-Bowles plan in Decmeber, 2010. Recall that if it had gotten 14 of 18 votes that it was to get an  up or down vote in both Houses, so already that wasn’t normal order.You could say POTUS walked away from his own commission (I said it was a mistake in my book, namely because the Fiscal Commission assumed the implementation of the ACA), or you could say that Republicans (and Bernie Sanders) filibustered the initial proposal to create such a commission (aka Conrad-Gregg Commission) within the Congress (no one seems to remember this). My main point is that once you had a big commission and the promise of an up or down vote with certain levels of passage, that was the end of normal order.
  • Then we had the debt limit fight of July/August 2011. No way there was going to be normal order while that typically political stunt event (party out of power laments debt increase, but a few vote for it if needed) was turned into some pledging to default, etc. for leverage. That was resolved by setting up a Super Committee that was supposed to either undo the Sequester with a Grand Bargain, or let the Sequester (that was designed to be mutually hated) move forward. No way there was going to be normal order while Super Committee was meeting; it sucked all the policy oxygen out of the room.
  • Then it was an election year, and the sun-setting of the taxes and the Sequester (together the fiscal cliff) and so there was no hope of normal order given those two things. There was even less hope of normal order when you had the administration moving to implement the ACA and Republicans saying if you elect us (House + Senate + Gov Romney) we will repeal the ACA.

That is how the last two years were ‘not normally ordered.’ Now there is a reasonable chance for a return to normal order and I generally think that is good thing. The area in most need of clarity is health policy, especially with House Republicans saying they will have a budget that will balance in 10 years (last Spring’s took 30). If they go ahead and embrace the higher tax baseline it will make it a bit easier, but they sure won’t be able to have a Medicare policy that says we have all these great things that will start in 10 years. Should be interesting.

In the drive for a sustainable budget, the Democratic party is far more reality based than are the Republicans for two reasons. First, they realize it will take higher taxes to fund any vaguely palatable level of spending as the Baby Boomers move into Medicare, Medicaid and Social Security. Second, they have a health reform plan that is flexible, meaning it allows for mid course corrections, additions, etc. Republicans say they want lower taxes, and still don’t have a coherent health reform approach even for a higher level of taxation, much less for one lower one. Normal order should make this a bit clearer.

*This approach has the effect of allowing the debt limit to increase without anyone ever voting for an explicit amount. This is actually a reasonable way to do this forever. It is better to fight it out via budgeting/appropriation process rather than after the fact.

note: revised Democrat party to Democratic party….didn’t trade in my card. thanks to @afrakt for the pointer, and revised in several others places for clarity.

Ryan budget and debt limit, ctd.

On March 22, 2012, the House of Representatives adopted the budget resolution that was reported out of the House budget committee (aka The Ryan budget). In doing so, House Republicans committed to increasing the public debt over the next decade, meaning the so-called debt limit will have to be raised continuously, even if the Ryan budget is implemented exactly. The debt limit implied by implementing this budget will be $17,072,810,000,000 in 2013, rising to $21,627,396,000,000 in 2022. I wrote about this a few weeks ago, but forgot until today to go back and update the necessary increases in the debt limit contained in the budget passed by the House of Representatives.

Here is page 6, lines 3-14 of the budget resolution, as passed by the full House:

DEBT SUBJECT TO LIMIT.—The appropriate
levels of the public debt are as follows:

p 6. top (start with line 1) [my comment]
Fiscal year 2013: $17,072,810,000,000.
Fiscal year 2014: $17,769,762,000,000.
Fiscal year 2015: $18,277,348,000,000.
Fiscal year 2016: $18,752,806,000,000.
Fiscal year 2017: $19,216,661,000,000.
Fiscal year 2018: $19,676,545,000,000.
Fiscal year 2019: $20,168,534,000,000.
Fiscal year 2020: $20,657,588,000,000.
Fiscal year 2021: $21,121,620,000,000.
Fiscal year 2022: $21,627,396,000,000.

Any budget that is not balanced will require an increase in the debt limit. Just remember that when we get to the absurd theater of the debt limit increase sometime from November 2012-January 2013 and remember that when we do, the question at hand will be whether we will pay for the spending we have already agreed to undertake.

The debt limit and the Ryan budget

The debt ceiling debate and discussion as a secondary step outside of the federal budget should be abolished.

Today, the House Budget Committee will mark up, or revise the Chairman’s mark of the Fiscal Year 2013 budget (aka the Ryan budget). This means they will go through and set the high level budget figures for the Fiscal Year 2013 budget, and set targets for the federal budget through 2022. Revenues, taxes, etc. One of the items they will be filling in is the debt limit, or how much borrowing authority will be required to implement THIS budget. The figures can be found on pages 5 and 6 of the Chairman’s mark (concurrent budget resolution that was adopted on March 22, 2012):

p. 5 bottom (start line 25) [my comment]

DEBT SUBJECT TO LIMIT.—The appropriate
levels of the public debt are as follows:

p 6. top (start with line 1) [my comment]
Fiscal year 2013: $17,072,810,000,000.
Fiscal year 2014: $17,769,762,000,000.
Fiscal year 2015: $18,277,348,000,000.
Fiscal year 2016: $18,752,806,000,000.
Fiscal year 2017: $19,216,661,000,000.
Fiscal year 2018: $19,676,545,000,000.
Fiscal year 2019: $20,168,534,000,000.
Fiscal year 2020: $20,657,588,000,000.
Fiscal year 2021: $21,121,620,000,000.
Fiscal year 2022: $21,627,396,000,000.

The numbers are now blank because the House Budget Committee has to decide these amounts today. The numbers above are what was passed by the House of Representatives on March 22, 2012. Sometime next December, or January, the U.S. government will hit the currently approved debt limit, and there will be a circus discussion in Congress about whether Congress will grant approval for the U.S. Treasury to borrow more money to pay the bills that Congress has told the Treasury to incur. Keep in mind when we do that in the future that the budget resolution being passed out of the House Budget Committee today has already laid out what they say the debt limit will have to be through 2022 to pay the bills for the budget authority they today will vote to grant (many details of how to implement the budget will be carried out by the Ways and Means and Appropriations committees). However, the big picture is set in the budget resolution.

Because the debt limit is denominated in nominal dollars (not indexed for inflation or the size of the economy in any way) we will have to increase the borrowing authority of the U.S. government for a long time to come, even if the Ryan budget became law; later today after they set these figures, I will fill in the blanks above. Success from a fiscal standpoint would mean the debt-to-GDP ratio would decline; even if this happens the debt ceiling will have to be raised. The only way to not raise the debt ceiling is to only have balanced budgets going forward.

The time to debate the debt ceiling is today, not later, after we have already agreed to spend the money.

Medicare Limit Instead of Debt Limit?

Noah Millman thinks that we should get rid of the debt limit in favor of a limit on Medicare spending.

We’re all agreed that the big driver of future deficits is the growth in Medicare, which in turn is driven primarily by the growth in the cost of medical services (secondarily by demographic factors).

Both parties agree with this, but there is stark disagreement about how to restrain the growth of Medicare: whether by greater government control of the medical system or by less (or by a combination thereof – Obamacare plus the voucherization of Medicare would be such a combination).

He goes on to state the obvious about the debt ceiling:

We’re also all agreed (everyone who’s actually paying attention, anyway), that the debt ceiling serves no rational purpose. Congress approves both taxes and spending; if Congress refuses to approve borrowing the difference, then Congress isn’t making a policy statement – it’s simply refusing to do its job.

In its place, he proposes a cap on Medicare spending and if that cap is to be violated in a given year, then Congress would have to pass a supplemental spending bill, a supplemental bill to reduce spending, or raise the Medicare ceiling and say the extra amount will be deficit financed. His point is that in the long run, the major driver of budget deficits is health care, and health care has its primary impact on the federal budget in the Medicare program. A policy such as the one Millman suggests would help to focus our attention on health care costs….and then we would have to decide whether we wanted to pay more than planned or to take steps to reduce planned spending.

Job One of the Super Congress Committee

The first thing they need to do is end the debt ceiling. From the prologue of my forthcoming book:

Debt ceiling debates will never be the same. There is no reason to expect that lifting it will be anything less than highlight of the 113th Congress unless one party controls the House, the Senate and the White House. Of course, 41 committed Senators could still wield massive political leverage if they were willing to blow up the tracks even if one party controlled all three levers of power.  The incentive to use the debt ceiling lift as political leverage has been rendered ‘on limits’ for future Congresses. And since the debt ceiling is denominated in nominal dollars, it will have to be raised in the near future. For example, the Ryan budget plan if implemented would require the raising of the debt ceiling consistently over the next decade, with the nation’s cumulative debt reaching $21.1 Trillion in 2021.

Now, when both parties hope to control the House, Senate and the White House in the 113th Congress is the time to say no to the madness that was just wrought upon us. Bruce Bartlett is a voice of sanity on the issue.