A Fiscal Policy Review of the 109th Congress

With just a few short post-election, lame-duck weeks left, the 109th Congress will leave behind a legacy of woefully inadequate action on fiscal policy. With a set of fiscal challenges that included the need for comprehensive tax reform, concerns over Social Security insolvency, large and growing deficits, the 109th Congress' list of accomplishments is almost non-existent. After Congress failed to enact a sinister overhaul of Social Security in 2005 and comprehensive tax reform disappeared from the national agenda in early 2006, it seemed plenty of time remained on the agenda for Congress to complete its fundamental annual budget work. Unfortunately, 2006 would be particularly bad year for Congress' fiscal policy work. Among the many failures:
  • No budget resolution agreement early in the year, setting the stage for additional fiscal breakdowns later on
  • Enactment of only two of the 12 spending bills Congress needed to pass in order to fund the government during FY 2007, which began Oct. 1
  • Failure to enact a slew of important legislation, from lobbying and budget process reform, to closure of wasteful tax loopholes that encourage overseas outsourcing and the Alternative Minimum Tax (ATM) patch
  • No action to address the long-term solvency of Social Security and Medicare
In addition, with House and Senate leaders obsessed with an estate tax rollback, other popular priorities like a minimum wage increase and the extension of the dozen-plus expiring tax credits, ranging from those for corporate R&D to tuition tax credits, continued to languish. It is little wonder that, according to an Oct. 19 Wall Street Journal/NBC poll, 16 percent of Americans approve of the job the 109th Congress has done. To put that in perspective, that's less than half of the Americans who currently approve of the job the president has done. It is the worst rating for Congress ever recorded. "When we say this is the most do-nothing Congress in the history of our country, this isn't just flippant ... This is true", Senate Minority Leader Harry Reid (D-NV) told The New York Times last month. It's not just the opposition in Congress that is leveling the "do-nothing" label. Recently, the "Dean" of political reporters, the Washington Post's David Broder, gave Congress what could modestly be described as bad marks. Broder reported that 11 prominent nonpartisan economists - "people who, by virtue of their work and long careers outside of politics, have earned reputations for delivering unvarnished analysis of economic policy" were asked to grade the economic performance of the Republican Congress. The class average: C-. In addition, a bipartisan pair of respected long-time congressional observers, Thomas Mann (senior fellow at the Brookings Institution) and Norman Ornstein (resident scholar at the American Enterprise Institute), reviewed the record of the 109th and concluded, "After 37 years in Washington... we are pretty well inured to shenanigans [but] the output of the 109th is pathetic measured against its predecessors." While some observers would argue a Congress that governs least governs best, there are significant consequences to Congress' inaction on fiscal matters. Problems that went unaddressed, such as finding a permanent solution to the creep of the AMT or the rapidly accelerating interest payments on the national debt, will only get worse - and more expensive - the longer Congress waits. In addition, because political leaders have exaggerated good short-term news on budget deficits, the long-term structural problems remain with no solution in sight, and the retirement of the Baby Boomers is one year closer. It would be unfair to suggest that Congress actually did nothing of significance on fiscal policy. It passed and the president signed a $781 billion extension of the debt limit. It was the fourth time Congress has raised the nation's credit limit since 2003, accounting for an additional $3 trillion of debt - or a loan equivalent to $30,000 from every American family. Not resting at simply failing to fix the country's fiscal problems, Congress actually made them worse. The Center on Budget and Policy Priorities recently concluded that the 109th Congress "took our already large projected budget deficits and passed legislation that will make them larger. The legislation increased projected deficits from 2005 (the year the [109th began]) through 2011 (when the current five-year budget window ends) by a total of $452 billion." Also making matters worse - despite continued statements from Congress decrying the complexity of the tax code - legislation passed since 2001 has "added more than 100 tax breaks to an already unwieldy tax system," according to the nonpartisan Urban-Brookings Tax Policy Center. Congress' only other notable fiscal accomplishment is also probably not one they are bragging about in campaign speeches. Before leaving Washington to try and convince the American electorate to send them back to Congress, the House and Senate passed a continuing resolution (CR) that continues to fund the government in the absence of completed appropriations bills. This CR contains a nasty hitch that sets funding at the lower of three levels: the House-only, Senate-only passed appropriations bills, or the previous year's funding level. The Labor-HHS-Education appropriations bill (H.R. 5647) did not pass either chamber, leaving funding for the vast array of domestic programs under the bill at the fiscal 2006 level - an effective cut after inflation. The CR remains in effect only until Nov. 17, and Congress will return to a lame-duck session after the elections on Nov. 13 How much time Congress will spend in session during the lame duck is unknown. Among the various loose ends that lawmakers will likely attempt to tie up are the remaining appropriations bills and the expiring tax extensions, collectively known as the "extenders." Passage of the "extenders" package is long overdue, with popular support for the legislation from both Democrats and Republicans. While these are the only items Congress will likely have time for, they could also attempt to pass a much needed increase in the minimum wage. The election outcome may still dictate strategy for the majority, but regardless of what they are able to pass in November, the fiscal policy accomplishments of the 109th Congress can already be judged a failure.
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