Congress is getting back to work with the first order of business dealing with the debt ceiling – again. The debt ceiling will be raised by $1.2 trillion on January 27 unless Congress passes and the president agrees to a joint resolution of disapproval. This procedure came out of last summer’s bruising battle over raising the debt ceiling and the net effect is that this increase in the debt ceiling is virtually automatic.
The House this week passed the disapproval resolution, but it is not expected to pass the Senate. And if it did, the president would veto it so the increase will go into effect as planned. Depending on economic developments during the year, the debt ceiling probably won’t need to be raised again until after the election in November.
Congress must also take quick action on the payroll tax cut extension that now expires at the end of February. Both parties are in favor of extending the tax cut, but the battle will be over how to pay for it.
Congress will need to find $160 billion in spending cuts and/or revenue increases and finding the offsets is what derailed a full-year extension in December. Some in Congress want to add several business tax credits that expired at the end of last year to the bill, increasing the amount of offsets that may be required. While the bill is expected to pass, the issue will probably tie up Congress for most of the next month.
The World Bank is warning of a possible slump in global economic growth that could be more severe than the crisis in 2008.
“The global economy is entering into a new phase of uncertainty and danger.” said the bank’s chief economist.
Many governments are in a weaker position now than they were when the 2008 crisis hit because their debts and budget deficits are bigger, according to the World Bank report. President Obama asked Congress for authority to shrink the size of government this week. He wants to merge five agencies into one that would replace the current Department of Commerce. The consolidation would fold the Office of the U.S. Trade Representative, which is now a stand-alone agency, into this new department.
The Small Business Administration, the Export-Import Bank, the Overseas Private Investment Corporation, the Trade and Development Agency and the business and trade functions of the Department of Commerce would be part of the consolidation. The move would save about $3 billion over 10 years.
There is also talk about folding USDA’s Food Safety and Inspection Service (FSIS) into the food safety unit at the Food and Drug Administration (FDA). Right now, 12 separate agencies are involved in food safety measures. While republicans in Congress have been clamoring for smaller government, it is not clear that Congress will approve this particular request from the president.
More and more people predict Congress won’t pass a new bill this year, even though the current farm bill expires at the end of fiscal 2012. Chuck Conner, former Under Secretary of Agriculture and the current head of the National Association of Farm Coops said this week that if Congress can’t pass a farm bill by Memorial Day it will have no chance of passing one until after the election!
Indiana Congressman Marlin Stutzman, a member of the House Agriculture Committee, says there is only a 50/50 chance Congress will pass a new farm bill and he thinks the current farm bill will just be extended into 2013.
The federal government paid out nearly $72 billion in fiscal 2011 under the Supplemental Nutrition Assistance Program (SNAP). This is double what it was in 2008! Nearly 45 million people were enrolled in the program last year, up from 28.2 million just three years earlier. (The average SNAP household has a gross annual income of $8,532 a year.)