Policy Priorities

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BUDGET WATCH: THIS WEEK...

June 17, 2011

Budget Negotiations Intensify

The negotiations surrounding deficit reduction have intensified on Capitol Hill and all eyes are now on the bi-partisan group of lawmakers, led by Vice President Biden. While a deal has not yet been struck, reports indicate the group is getting closer and trying to have an agreement by early July. There continues, however, to be some fundamental differences in approach. For example, on the concept of a deficit reduction cap which would be triggered if the deficit exceeds a certain amount, Democrats appear to want the cap to trigger both tax increases and spending cuts, while Republicans continue to call for only spending cuts.

This week, the House Judiciary Committee approved a balanced budget amendment to the Constitution. Some members of Congress are calling for the amendment to be attached to a vote to raise the debt limit, in exchange for their support on raising the debt limit. The amendment would require the U.S. to balance its budget each year, cap spending at 20 percent of GDP, and require a three-fifths vote for Congress to approve deficit spending even in a crisis. Such a majority would also be required to raise taxes. A balanced budget amendment would virtually end the government’s ability to be flexible in response to natural disasters and economic recessions and to respond to the needs of an increasingly larger aging population. The amendment could come to the House floor for a full vote as early as the first two weeks of July.

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