On Thursday, January 31 the Senate approved the bill to postpone the debt ceiling battle for four months.  The proposal was developed by the House Republicans.  The Senate adopted the House GOP measure by a vote of 64-34, albeit with only 11 Senate Republicans in support.

Republican Plan Pushed Over the Top by Democratic Support

The process to both delay the debt ceiling debate and to therefore force three separate budget debates — automatic long-term budget cuts (sequestration), providing government funding for the rest of the current fiscal year, and reaching a long-term deficit reduction plan (tied to a debt ceiling increase) — was developed by House Republicans during their January retreat in Williamsburg, Virginia.

Almost immediately thereafter the White House indicated it would not oppose the plan and Senate Democrats indicated they would agree to it.  The final vote had 98 percent of Senate Democrats but only 24 percent of Senate Republicans voted to approve the House Republican plan.  In fact, the House Republican plan would have failed in the House if there had been a party line vote.  Instead, 43 percent of House Democrats supported the measure, allowing it to pass.

Triple-Headed Budget Monster

The triple-headed budget monster created by the new law will consume much of Washington’s time over the coming four or five months.  While the outcomes of the triple-header debate will inform the budget parameters for the 2013 Farm Bill and 2014 Agriculture Appropriations Bills, it will also delay the start of the 2013 Farm Bill and 2014 Agriculture Appropriations Bill debates until all the budget dust settles at the conclusion of this three-part process…if in fact it reaches a conclusion.  In other words, at this point in time at least, it appears work on the new farm bill and the new appropriations bill will not formally begin until June at the earliest.

A quick review of the three steps follows.

First up, before March 1 Congress must decide whether to let $1.2 trillion of automatic budget cuts trigger, including an $85 billion cut to federal spending in just the remaining months of Fiscal Year 2013.  The choices boil down to (1) do nothing and let them trigger, (2) develop a modified package of cuts to substitute for across the board automatic cuts (either by March 1 or sometime thereafter, in which case automatic cuts would start but then perhaps stop at a later date), (3) repeal the cuts, or (4) kick the can further down the road.  Based on recent pronouncements by policy makers, the first two options are the ones getting the most serious attention.

Second up is reaching agreement on discretionary funding levels for the entire government and all its discretionary programs for the last six months of the current fiscal year (April through September 2013).  This step, required by no later than March 27, is necessitated by the fact that Congress could never agree on 2013 funding bills last year, and instead placed government spending on autopilot at 2012 levels for the first six months of the current fiscal year.

The task ahead for the appropriations committees to develop this new six-month bill will very much be complicated if sequestration is allowed to trigger, thereby reducing current funding levels for domestic non-defense programs by about 5 percent and for defense programs by a bit over 7 percent.  Those are huge one-year cuts under any circumstances, but trying to reach them with half the fiscal year (at higher spending levels) already gone makes them all the more draconian.

In the three spot is attempting to agree on a long-term budget deficit reduction deal.  Such a deal could include any combination of direct spending increases and decreases and tax spending increases and decreases which combined yield a net reduction in the deficit over the next decade.  Or, in other words, we are talking about basically the same deal that has completely eluded policy makers for the past two years.

Both the House and Senate Budget Committees will produce their versions of a budget resolution by the middle of April.  Those proposals will no doubt be very, very different.  At that point, only a month will be left before the temporary suspension of the debt ceiling, just approved by the House and Senate, runs out on May 18.  In May, therefore, either a big budget deal that has so far proved elusive will be forged, or Congress will once again have to figure out some elaborate new version of their “kick the can down the road” game.

Modified Sequester?

The threat of automatic, across the board budget cuts were placed in the Budget Control Act of 2011 with the idea they were such a bad idea that neither party would allow them to ever actually trigger.  Instead, the theory went, they would serve as the prod to ensure a global budget deal would be reached.

At the end of 2012, Congress delayed the automatic cuts for two months.  Now, with the new deadline just a month away, more and more Members are acting as if this time the automatic cuts will in fact trigger and the reductions will be implemented.  Virtually no one believes this is sound policy, but there is an increasing mood of inevitability growing nonetheless.

Senate Majority Leader Harry Reid (D-NV) stepped into that void this week, indicating that he would attempt to move a bill to avert the sequester.  He did not, however, predict such a measure could pass prior to the March 1 deadline.  Instead of a clean deal in which the March 1 trigger is averted, some observers believe the emerging Senate Democratic plan would allow the automatic cuts to proceed for a month, but a move would then be made to modify the nature of the cuts as part of the bill to fund the government for the rest of the fiscal year, a bill that must be passed by March 27 to avert a government shutdown.

What exactly would be in a modified package remains to be seen.  At its most macro level, all of these deficit reduction debates boil down to a debate over a balanced approach, meaning both direct spending and tax spending is on the table, versus direct spending-only approaches.  At the most micro level, the debate involves issues like how much flexibility agencies would have to target spending reductions and to transfer funds from one program to another.  In between those poles lie innumerable specific spending and tax reform decisions.

Farm Bill Exceptionalism

One of the great ironies of this protracted budget mess is the fact that a new five-year farm bill that included very substantial budget savings – savings three to five times larger than farm bill savings that will occur automatically under sequestration – was passed by the full Senate and by the House Agriculture Committee last year, but then languished when the House GOP majority decided to keep the bill from ever coming to the House floor for a vote.

Had the 2012 Farm Bill been allowed to pass and become law, and had the House and Senate split the difference between the savings generated by their respective bills, Congress would have already reduced the deficit by $29 billion over the next decade, or slightly more than quadruple the amount that will be saved from the farm bill if sequestration is allowed to trigger on March 1.

No other congressional committees can make this claim.

A Modest Proposal

At this point in time, it is not possible to resurrect a deal, available last year, on a new farm bill in all of its details.  The full House was denied the opportunity to amend the bill by the Majority’s leadership, and besides we are now in a new Congress with new members and new committee make-ups.  The process must begin all over again, and unfortunately, due to the new bill postponing and stretching out the budget debate, starting all over again on a new farm bill will be delayed for the next period of at least months.

It is still quite possible, however, for Congress to agree to specific terms and parameters for the debate of a new five-year farm bill in 2013.  If they did so, it would greatly enhance the chances for a new farm bill to be enacted this year.  In fact, done right, it would all but guarantee a new farm bill.

For instance, in a vote later this month (or in March) on a measure to modify the automatic sequestration cuts, Congress could include a measure removing all farm bill mandatory spending from the sequester provided the Agriculture Committees produce a bill by a date certain that will save $29 billion (or whatever other figure they care to choose) over the next decade.  To ensure that such a proposal is in fact reported out of Committee and that it in fact actually receives floor consideration in both chambers, the provision could include specific deadlines for Committee and for floor action, and specific guidelines for fair but expedited floor consideration.

With such deadlines and conditions, it is a near certainty a new farm bill would become law this year.  However, to allay the fears of any doubters, the measure could also return the farm bill to automatic sequester rules if the effort failed.

This is not a proposal many people are talking about, but it should be.