Senate Finance Committee Hearing on Federal Debt Problems

Committee hearing, former NEC director Larry Lindsey testified that when Standard & Poor’s warned that it might downgrade U.S. debt, the key justification was not the debt ceiling, but that according to S&P “if we conclude that Congress and the Administration have not achieved a credible solution to the rising U.S. government debt burden and are not likely to achieve one in the forese”It’s all spending cuts. The White House bid to raise taxes has been shut down. And as I vowed back in May -- when everyone thought I was crazy for saying it -- every dollar of debt limit increase will be matched by more than a dollar of spending cuts. And in doing this, we’ve stopping a job-killing national default that none of us wanted,”eable future.”  Center on Budget and Policy Priorities President Robert Greenstein said the goal for Congress should be to slash the budget deficit to 3% of GDP using a 50-50 split of new revenue and spending cuts (including to entitlement programs like Social Security and Medicare).  Senator Orrin Hatch said that while certain tax breaks could be eliminated, the move must be accompanied by overall tax reform.  Chairman Max Baucus said that by cutting the deficit by $2.5 trillion, the substance of the “Reid” deficit cutting proposal, the nation’s debt would be stabilized at 75% of GDP and not rise to 87% as currently projected.  In related news, the Administration announced a new “Government Accountability and Transparency Board” which will monitor all government spending for waste, fraud and abuse.  HHS is represented on the board by the department’s Inspector General and the Assistant Secretary for Financial Resources and CFO.

House and Senate Both Reject Each Other's Deficit Cutting Legislation

When the Senate considered the House-passed Cut, Cap and Balance Act, H.R. 2560, Democrats tabled the legislation.  The Senate used the same procedure last week to again table, on a 59-41 vote, a second Boehner bill which passed the House on a 218-210 vote at the eleventh hour and before the August 2nd deadline to increase the federal debt limit.  House Speaker John Boehner’s Short Term Default Act (amending S. 627, the Faster FOIA Act of 2011) would increase the federal debt ceiling by $900 billion which would require another extension by early 2012; would cut spending by $917 billion over ten years; and would provide a second increase to the debt ceiling contingent on enactment of recommendations from a 12 member joint committee of Congress which would be charged with producing at least $1.6 trillion in additional deficit reduction.  Congress would have to pass the committee’s reported legislation by December, 23, 2011.  The bill would also cap FY 2012 discretionary budget authority at $1.043 trillion and FY 2013 budget authority at $1.047 trillion.  Federal budget authority would rise steadily over the subsequent eight years to $1.234 trillion in FY 2021.  In addition, the bill would trigger automatic across-the-board cuts if the caps are exceeded.  Also, both houses would have to vote on a balanced budget amendment to the constitution by year-end.  Speaker Boehner garnered 218 Republican votes for passage only after much arm-twisting of several reluctant Tea Party Republicans.  President Obama said he would veto the House bill and that he would now have to rely on negotiations between Senate Majority Leader Harry Reid and Minority Leader Mitch McConnell to craft and then pass a satisfactory bipartisan compromise in order to avoid a default or deferral of federal obligations.  However, House Speaker John Boehner put an earlier version of Majority Leader Reid’s plan to the test in the House on Saturday.  The House rejected, on a vote of 246-173 H.R. 2693, the Bipartisan Budget Control Act, which would raise the debt limit by about $2.2-2.4 trillion over ten years and put a another vote beyond next year’s elections.  The bill would also provide a comparable amount in spending reductions, but including a supposed $1 trillion in savings from winding down Iraq and Afghanistan war spending.  The bill would also include statutory caps on security and non-security discretionary spending and provide for a joint committee on deficit reduction with a fast track vote on the committee’s recommendations.  Of note, the bill would not increase revenues as demanded by Republicans throughout the standoff.  The refusal on Saturday of Senate Republicans to allow Senator Reid to proceed to debate and a vote on the Reid plan creates a dynamic whereby Senator Reid and Senator McConnell and their caucuses will have to craft a compromise that can pass both the Senate and the House and be signed into law by President Obama.

Petition to Supreme Court on Constitutionality of Individual Mandate

The Thomas More Law Center, filed a writ of certiorari with the U.S. Supreme Court for a review of the 2-1 decision of the U.S. Court of Appeals for the Sixth Circuit that found the individual mandate provision of the PPACA as a valid exercise of congressional authority under the commerce clause.  The Center said that a review is necessary to “establish a framework of meaningful limitations on congressional power under the Commerce Clause”, in particular given the statement by Judge Jeffrey Sutton, who joined Judge Boyce Martin Jr. in holding the individual mandate constitutional, that the court should “either stop saying that a meaningful limit on Congress’s commerce powers exists or prove that it is so.”  In related news, the state of Ohio certified a ballot initiative promoted by the Tea Party and other Republicans which would allow for state residents to vote on whether or not the state should opt out of the PPACA individual mandate.

House Hearing on PPACA's Effect on Small Businesses

At a House Small Business Committee Healthcare and Technology Subcommittee hearing, the director of the CMS Center for Consumer Information and Insurance Oversight testified that small employers will continue to offer health insurance coverage to their employees rather than pay penalties to opt out when the PPACA mandates and health insurance exchanges are put into place.  He said the exchanges will help reduce insurance costs by pooling small businesses and prevent insurers from charging more for unhealthy employees.  He said he does not expect the PPACA medical loss ration requirement to drive insurers out of the market.  He also said guidance on eligibility and enrollment will answer questions such as “When an employer makes an offer of coverage, is that binding on the dependents, the family members of the employee?”  Another witness testifying on behalf of the U.S. Chamber of Commerce said, to avoid employer mandated costs for full-time employees or penalties for non-compliance, his restaurant chain and others like his are likely to reduce employee hours below full-time.  Former CBO Director Douglas Holtz-Eakin testified that the budgetary costs of the insurance subsidies through the exchanges are going to explode and may cost more than $1.4 trillion in the first 10 years.

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