Next Year’s Budget Debate May Be Total Mess

Originally published at Capital Gains and Games. [1]

This column was written a few days before the elections and is being published on Election Day. So rather than talking about the election results before they happen (What a concept!), and instead of continuing what is now my weeks-long rant about the fiscal cliff, I thought it best to focus on something that few other federal budget watchers so far have dared talk about: There will be a big budget debate next year and it’s likely to be very ugly.

This will come as a shock to those who watched the comparative — that is, relative to the chaos of 2011 — peace and quiet of this year’s debate and assumed that was the new normal.

The truth, however, is very different. Unless something very unexpected happens on Election Day (I know I promised, but I just couldn’t help myself), the 2013 debate is more likely to resemble what happened in 2011, when a steady series of federal budget-related cliffhangers kept us on the edge of our seats through most of the year.

There were several close calls in 2011 on government shutdowns as short-term continuing resolutions were about to expire. There was also the debt ceiling debacle that continued to the last minute before a deal was reached. The debt ceiling deal created yet another deadline that the anything-but-super committee failed to meet and that triggered one of the two fiscal cliffhangers that are now causing so much economic and financial agita.

And let’s not forget the failed budget negotiations in 2011 between the president and the Speaker, the vice president and the Majority Leader, the Bowles-Simpson commission and the “gang of six” in the Senate.

Most of this budget warfare stopped in 2012 because, unlike the situation the year before, few budget-related decisions absolutely had to be made.

The debt ceiling deal raised the government’s borrowing limit enough to last through the elections. The federal government was funded with a continuing resolution that lasted through all of fiscal 2012, and when that ended, another CR was enacted for the first six months of fiscal 2013.

There was endless bluster, bombast and bravado, but once the decision was made about the six-month CR, it was all budget barking with no opportunity to bite anything or anyone.

Fast-forward to next year and ask yourself whether what’s ahead doesn’t give you a strong sense of deficit and debt déjà vu.

The government could be facing one or more spending and taxing decisions in January and February if the fiscal cliff (My apologies, there I go again.) is either delayed for a few weeks or happens as scheduled on Jan. 1 and Jan. 2 because inevitably there will be efforts to change some or all of it retroactively.

Shortly thereafter, the federal debt ceiling will have to be raised. The government will reach its borrowing limit sometime in December, and the Treasury has indicated that it will be able to use various cash management techniques until the middle of February. At that point, legislation will be needed.

The current continuing resolution for fiscal 2013 is in effect through March. Without further action by Congress and the president, some of the federal government will shut down on April 1.

And if all that isn’t enough, the regular fiscal 2014 budget process will be under way while all of this is happening. The process could be delayed if there’s a change in administrations. But if there is no change, the president’s budget is supposed to be sent to Congress by Feb. 4, the starting gun for Congressional budget efforts.

It’s technically possible that all of this could be dealt with in the lame-duck
session. There’s no law or rule that would stop Congress and the White House from agreeing to a mega pact that, for example, would deal with the fiscal cliff, raise the debt ceiling and fund the government through all of 2013. It could also include a big tax reform and Medicare and Medicaid bill that, at least in the most general terms possible, seems to be included in so many CEOs’ dreams and prayers these days.

Using the most polite language possible, that’s just not likely to happen.
The multiple-bites-at-the-budget-apple strategy used by House Republicans in 2011 wasn’t inadvertent or ad hoc; on the contrary, it was both intentional and announced in advance.

Given the probable continuing political split in Congress (Damn, I really tried not to go there.), there’s no reason to believe that their political strategy will be any different next year. Indeed, given the makeup of the GOP Conference in the House next year, it’s not clear it could be different.

Having the House and Senate, Democrats and Republicans, and the White House and Congress come together during the lame-duck session on the precise list of issues that has separated them the most assumes they’ll be able to do in four weeks what they haven’t been able to do over the past four years.

If Republicans and Democrats move further away from each other after the elections, as I and many others expect, a big or even medium-sized budget deal in the lame duck will be less rather than more likely.

No big budget deal during the lame duck means that the disconcerting 2011 budget debate most likely will be replicated and then some in 2013. The real difference is that with the 2011 experience still fresh, we know how bad this could really be.