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Storm relief sets up new spending without cuts
Question of the Day
President Obama’s call for $60 billion in additional spending to cover damage from Superstorm Sandy tops a congressional wish list of more stimulus spending, expanded unemployment benefits and extending the payroll tax cut — all without finding cuts elsewhere in the federal budget.
The new spending, totaling as much as $250 billion, and the lack of what lawmakers call “offsets” threaten to complicate the already difficult “fiscal cliff” conversations going on in Washington, where the push is on to lower deficits over the long run.
“The American people are expecting that the cliff negotiations to be focused on reducing the deficit, not increasing spending,” said Sen. Jeff Sessions, Alabama Republican and ranking member of the Senate Budget Committee, who has called for any form of new spending to be balanced by savings or reductions elsewhere in the federal budget.
Members of both parties, though, are shying away from demanding that the huge, unexpected cost of the recovery package for New York and the other states battered by Superstorm Sandy not be lumped in with the federal deficit. Lawmakers and officials from the region are pressing hard for the money now.
The office of House Speaker John A. Boehner, Ohio Republican, did not return a message seeking comment on whether he would require a dollar-for-dollar offset for the extra spending.
Democrats, meanwhile, generally say that Sandy’s costs and other additional spending should be tacked onto the federal deficit. They say that is how past national emergencies have been financed and that programs such as extended unemployment benefits provide a great bang for the buck for an economy still struggling to gain altitude.
The new spending proposals coincide with a report from the nonpartisan Congressional Budget Office that the nation has rung up a nearly $300 billion deficit in the first two months of the fiscal year, which started Oct. 1 — putting more pressure on lawmakers to get the nation’s fiscal house in order as the year-end deadline to deal with the fiscal cliff comes ever nearer.
Still, Mr. Obama rolled out the Superstorm Sandy package late last week, and the administration said the tens of billions of dollars in “emergency funding can and should be provided without an offset.”
Kevin Hassett, of the American Enterprise Institute, a conservative think tank, warned that the longer lawmakers rely on deficit spending, the bigger the nation’s fiscal problems will get.
“Democrats would clearly trap us in a cycle of dependency on Keynesian stimulus,” Mr. Hassett said. “That cycle leads to financial ruin, and the sooner we start seriously pursuing real fixes, the better our chances of turning this economy around.”
Democrats say that Congress should not get mired in findings offsetting spending cuts, citing the precedents of such big-ticket items such as the aftermath of the Sept. 11 terrorist attacks and Hurricanes Katrina and Rita.
The buy-now-pay-later approach — with interest — has been on full display on Capitol Hill, where Sen. Bob Casey, Pennsylvania Democrat, introduced a bill last Wednesday to extend Mr. Obama’s 2 percent payroll tax “holiday” another year without offering any way to pay for what amounts to upward of $110 billion in spending.
The following day, Sen. Jack Reed, Rhode Island Democrat, told reporters in the Senate Press Gallery that Congress should stretch emergency unemployment benefits, scheduled to expire, through 2013, but lawmakers don’t have to cover the estimated $30 billion price tag with additional savings or spending reductions.
“Traditionally, until very recently, these extensions of unemployment benefits have been done without an offset,” Mr. Reed said. “I think we’d get a bigger bang for the buck in terms of job creation by doing it without an offset.”
Moments later, Senate Majority Leader Harry Reid marched into the same room and delivered what sounded like the exact opposite message. Tax rates, Mr. Reid said, should be raised for the nation’s top earners because Congress must come up with new revenue streams to support its spending.
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