The Senate and House ended the debt standoff with the president by passing the debt deal this past Monday evening.
It was just in time for the president to sign the bill into law before our government defaulted on some of the bills we owe beginning as early as Tuesday, Aug. 2. The Senate members then went out for their August recess only to reconvene this past Friday to end their standoff with the House on another bill.
This action dealt with passing a temporary extension of funding for the Federal Aviation Administration. Both of these bills had been around Capitol Hill for months. Treasury Secretary Timothy Geithner had warned Congress back in May that our governments borrowing authority would run dry by Aug. 2. The FAA extension, HR 2553, had passed the House by a vote of 243-177 on July 20.
This was the 22nd extension this agency has received from Congress instead of getting annual funding like most other government agencies. The Senate refused to take up the extension because of the cut in the essential air service program. This is a program that subsidizes some rural airports. Since the Senate refused to take up the bill, the FAA had been out of money and thus not able to collect the ticket taxes paid by each airline to fund the FAA.
Under pressure from the president, the Senate Democrats agreed to pass the bill without any changes on Friday, Aug. 5, and the president signed the bill into law by lunchtime.
The debt deal that passed earlier in the week increases our federal borrowing authority through the beginning of 2013 by expanding our debt limit by $2.4 trillion. In exchange for increasing the debt limit, the GOP members of Congress wanted dollar-for-dollar spending cuts for every dollar spent on the new debt limit. This meant that the debt deal cut $917 billion quickly and tasked a 12-member super-Congress to find the remaining approximately $1.5 trillion.
The super-Congress can find this money by cutting programs, capping the growth of programs and reforming entitlements, so they don't spend as much money as they are on track to spend or raise taxes. However, the super-Congress is tilted pretty heavily against the raising of taxes and more toward spending cuts. This is not because of the membership of the supercommittee -- the members aren't appointed yet and the leaders of Congress have until Aug. 16 to do so.
Raising taxes will be hard for the super-Congress because of the way the super-Congress starts with a baseline or framework containing current law tax-policy. So if the super-Congress were to raise the tax rates, the additional money raised by taxing our income more wouldn't count toward the $1.5 trillion that they must find. This is because tax rates are already current law. The same is true with expiring tax provisions.
The super-Congress can write policy that allows a certain tax provision to expire. Maybe that provision would save the federal government billions of dollars because the government wouldn't have to pay the tax break. However, if it were going to expire because of the law that initially put it in place, the super-Congress wouldn't get credit for saving that amount of money. The only way that it can get credit for saving the government money is to create new taxes.
If, say, the super-Congress wanted to end the depreciation that corporate tax owners can take as a result of owning a corporate jet, then that would be OK and the super-Congress would get credit for the money raised for our government to go toward deficit reduction.
In addition, the debt deal mandates that both the House and Senate must vote by Dec. 31 of 2012 on an amendment to our Constitution regarding a balanced budget. But the debt deal doesn't mandate the outcome, it just requires the vote in both chambers.
Finally, the debt deal provides that if the super-Congress fails to report a bill making recommendations to cut the additional $1.5 trillion, or Congress fails to pass it, then our government is automatically cut. This is called a sequester and it hits our government agencies in the following fashion:
- 50 percent of the $1.5 trillion sequester comes out of the defense budget;
- 48 percent of the $1.5 trillion sequester comes out of nondefense programs (dozens of programs are exempt, however);
- 2 percent of the $1.5 trillion sequestration comes out of Medicare.
Some important dates to remember from the debt deal are these:
- Aug. 16 -- Super-Congress membership must be named by congressional leaders.
- Sept. 16 -- Super-Congress must have its first meeting by this date, having given 48 hours' notice.
- Oct. 14 -- If other committees want to give the super-Congress some recommendations, this is the date other committees must do so.
- Nov. 23 -- Supercommittee must report its recommendations to raise $1.5 trillion.
- Dec. 23 -- Supercommittee recommendations must be voted on in both the House and the Senate.
- The House debate is limited to 2 hours.
- The Senate debate is limited to 30 hours.
Former Speaker of the House Nancy Pelosi, D-Calif., said last Friday: "The American people are watching to see if the bipartisan joint committee will develop a plan to responsibly reduce the deficit in a balanced way while promoting economic growth and creating jobs." This statement can probably be echoed by virtually all members of Congress.
She said it before the rating agency of Standard & Poor's downgraded our country's AAA rating toAA for the first time in our nation's history. They said that congressional bickering was part of the decision to downgrade our rating. Former Speaker Nancy Pelosi went on to say on Friday: "The work of this committee will affect all Americans, and its deliberations should be open to the press, to the public and webcast." It might just be this type of hypocrisy that S&P is referencing.
Stay tuned to see if the super-Congress gets named before the deadline of Aug. 16 to help minimize the effect of our nation's downgrade.
Elizabeth B. Letchworth is a retired, elected United States Senate secretary for the majority and minority. Currently she is a senior legislative adviser for Covington & Burling, LLC and is the founder of GradeGov.com.
