Paul Ryan walks fine line on budget deal as he prepares for speaker’s chair

28 Oct 2015 | Author: | No comments yet »

Budget deal’s big winner: U.S. economy.

Washington — The bipartisan deal announced by House Speaker John Boehner appears to be a win-win-win – for the White House, Republicans, and Democrats. House of Representatives, lobbied lawmakers Tuesday to approve a new government spending plan and increase the country’s borrowing authority, even as conservative Republicans attacked the deal. It would also clear out one big worry facing the Federal Reserve as it attempts to finally end an era of emergency interest-rate policy that has left the central bank with few weapons in its arsenal if the economy does turn south again. “This would take away a very big potential negative and remove a serious threat at a time that the economy feels a little fragile,” said Mark Zandi, chief economist at Moody’s Analytics. “The budget battles of the last five years did a great deal of damage in terms of raising borrowing costs, constraining business investment and depressing consumer spending. President Barack Obama and top lawmakers from both parties reached a tentative budget agreement that would avert a U.S. debt default and reduce chances of a government shutdown, easing years of political friction over fiscal policy in Washington. “It’s going to pass with a bipartisan majority and I’ll be really happy,” U.S.

A White House official said the deal would “break the cycle of shortsighted, crisis-driven decision-making.” The toxic fiscal cycle — which began with a near default and the first-ever U.S. credit rating downgrade in the summer of 2011 — clearly slowed the recovery following the brutal financial crisis and recession. They said it broke a 2011 pact limiting spending and bypassed rank-and-file lawmakers in deciding to boost spending by $50 billion in 2016 and another $30 billion in 2017. “I think this process stinks,” said Ryan. “This is not the way to do the people’s business. The government shutdown of 2013 shaved an estimated 1.5 percentage points from economic growth; the economy has struggled to stay above 2 percent annual growth throughout the recovery. “These events clearly produced big hits to confidence and equity markets and hurt both Main Street and Wall Street,” said Jim O’Sullivan of High Frequency Economics. “The presumption this time was that the debt limit stuff was just a bluff, but if that had been wrong it would have been very bad.” A budget agreement reached in 2013 helped usher in a period of relative calm in Washington that boosted confidence and helped lead to over 4 percent growth in the second and third quarters of 2014, the strongest period of the recovery.

Much of it has to do with the way the deal was put together – highly dependent on one man who is leaving the scene and highly reliant on a secretive negotiating process involving only a few key people and their staffs. Boehner negotiated the deal with the Senate Republican leader Mitch McConnell, as well as House Democratic leader Nancy Pelosi and Senate Democratic chief Harry Reid. But the hard-line House Freedom Caucus has been demanding a different way – a bottom-up approach, which could actually complicate dealmaking for a future Speaker Ryan. The plan would fully fund the federal government and extend the government’s debt ceiling, or borrowing authority, through March 2017, two months after Obama leaves office. The new budget deal would also ease some of the fiscal tightening that began with the “sequestration” agreement that ended the 2011 debt limit crisis.

That coming departure has freed him up to negotiate directly with Democrats in Congress and with President Obama, unconcerned about another eruption on his right flank from the Freedom Caucus. “This is not a good sign for the budget process. The extra spending would be offset by long-term savings to the Social Security Disability Insurance program and a cap on payments to health care providers by Medicare, the federal government’s health insurance program for senior citizens. The plan must be approved by the House and Senate and signed by Obama before next Tuesday, November 3, when the government’s current borrowing authority expires and the nation faces a first-ever default on its debt obligations. The latest budget agreement is not exactly a massive stimulus spending plan — the Congressional Budget Office says it would reduce the deficit by $76 billion over 10 years — but does represent another move away from immediate austerity. Congressional leaders would then enter into negotiations to determine how to fund individual government agencies before December 11, when a temporary spending plan expires.

Freedom Caucus member Mo Brooks of Alabama called the accord “financially irresponsible” because it would increase spending by about $80-billion (U.S.) over two years. Patty Murray (D-Wash.) said it “restores critical investments in health care, education, defense jobs and other priorities.” Wall Street reacted tepidly to the news out of D.C. on Tuesday, with most traders expecting that Washington would find a way out of its latest fiscal mess.

Two conservative groups, Club for Growth and Heritage Action, announced their opposition in a joint statement that called the agreement a “zombie budget deal.” Mr. Having been forced out by hardline conservatives angry over his willingness to negotiate with Democrats, Boehner wanted to complete the spending and debt ceiling deal before leaving office, so that Ryan would not immediately face a contentious political debate in his first days as the House speaker.

The House Republican caucus is set to formally pick Ryan as its choice for House speaker on Wednesday, with the full House expected to ratify the choice on Thursday. Ryan told reporters. “As a conference, we should have been meeting months ago to discuss these things, to have a unified strategy going forward.” Later, Mr. Their preferred approach would empower committees, and themselves, to a much greater extent. “Putting together a very complex deal and giving members less than 48 hours to read it, study it, and vote on it with virtually no input – it’s about as bad as the process gets around here,” said Rep. The additional spending is paid for by measures to ensure hedge funds and private equity companies pay full taxes and it cuts wasteful programs, he said. The budget deal means that central bankers can now stop trying to game out political scenarios that could force them to hold off on rate hikes — or take other extraordinary actions — in the face of D.C. dysfunction.

He’s been trying to figure out if he’s going to be speaker this week, not if he’s cutting a debt ceiling deal,” said Freedom Caucus founder Rep. They don’t like that it busts budget caps of the 2011 Budget Control Act by $80 billion, even as it raises the current $1.8 trillion debt ceiling. “That’s two strikes, and there are plenty of other third strikes in there,” said Rep. The budget increases are being offset by cuts elsewhere, including small-scale reforms to Social Security and Medicare – long sought by Republicans. But Representative Huelskamp is skeptical about whether those reforms will ever pay off, while Mulvaney says Boehner is “merely moving the deck chairs.” Some observers say that even by “cleaning out the barn” for his successor, Boehner hasn’t really made it easier on Ryan.

Peter King (R) of New York, a moderate, in an interview. “He’ll be able to actually start working toward governing as opposed to going from crisis to crisis.”

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