Budget

The House Rules Committee announced Monday that it will vote Wednesday on a rule effectively setting a spending ceiling for the second half of fiscal 2011.

House Budget Committee Chairman Paul Ryan (R-Wis.) was given rare powers to unilaterally set the ceilings for the rest of 2011 in a rules package the House adopted this month. The powers were necessary since Congress never adopted a 2011 budget resolution. The new rule would guide Ryan to set ceilings that assume “a transition to non-security spending at fiscal 2008 levels.”

The hiring of Vice President Joe Biden’s new chief of staff Bruce Reed last week may bolster the chances that the administration and Congress can agree on a long-term deficit reduction package, sources said.

Reed most recently served as the executive director the president’s deficit commission and played a key role in drafting the plan by its chairman to reduce the nation’s debt. The mix of spending cuts, entitlement reform and tax reform gained bipartisan support by a surprising 11 out of 18 members of the commission. 

At issue is an administration policy that was announced in September 2009 by the outgoing White House ethics czar.

A majority of those asked prefer cutting spending to raising taxes as a way to reduce the federal deficit, according to a CBS News poll. 

In the poll, 77 percent prefer to cut spending, 9 percent want to raise taxes and another 9 percent want to do both.

While reducing spending is a top priority, most couldn't volunteer a program they'd be willing to see cut in order to reduce the deficit  with only 38 percent naming a program they would support cutting. 

The top responses were military/defense (6 percent), Social Security/Medicare (4 percent) and welfare/food stamps (4 percent).

The House Republican conference heard from three experts with distinct ideas on spending cuts during a Friday morning panel on the budget deficit at their annual retreat.

The budget and debt event in Baltimore featured former Bush economic adviser Keith Hennessey, the American Enterprise Institute’s Kevin Hassett and Boston University economist Larry Kotlikoff.

Majority Whip Kevin McCarthy (R-Calif.) said at the retreat that three main points of focus at the retreat are whether and how to raise the debt ceiling, the continuing resolution that expires March 4 and the 2012 budget.

The Office of Management and Budget confirmed Friday that it is the administration’s position that Congress should not tie any other business to a bill raising the nation’s debt ceiling.

According to the latest analysis by the ratings service Moody’s, it is unlikely the U.S. will get its fiscal house in order anytime soon and this could lead the ratings service to take a negative outlook on the U.S. Aaa bond rating. For now the outlook on the U.S. rating is "stable."

Moody's Vice President Stephen Hess said in an interview Friday that a negative outlook signals the market of the increasing credit risk of U.S. debt and could be the first step in a process to downgrading the rating on U.S. treasury bonds. A negative outlook on a rating could lead to a 90-day review for downgrade. However, the negative outlook might also remain in place or revert back to stable.

Moody's put some U.S. treasuries under 90-day review in 1996 when Republicans resisted raising the nation's debt limit, he said, and such a review could be initiated if there is a refusal to raise the limit again in the spring.

"It is certainly not good financial management," Hess said of talking about not raising the limit as some in the GOP have said. The bonds reviewed at that time were those with interest payments due within three months since failing to raise the debt ceiling could result in an ability to make such near-term interest payments.

In it latest quarterly Aaa Sovereign Monitor issued Thursday, Moody’s said the U.S. stands out among developed nations like the U.K., Germany and France in not having any plan in place to get its burgeoning national debt under control. Hess said Moody's is looking for a comprehensive package of deficit reduction and the political environment for this is not favorable.

Sen. Mark Warner (D-Va.) warned lawmakers Thursday that refusing to raise the government's debt limit would amount to playing "Russian roulette with the world's economy."

"You've got to be careful with the debt limit," he said at a forum on small-business lending hosted by the Federal Deposit Insurance Corporation.

The NASA Inspector General released a report Wednesday revealing $2.7 million in fraud and waste involving research grants connected to the Small Business Innovation Research program.

Nextgov reports the audit began after a previous investigation found some applicants had collected multiple payments. The SBIR directs federal research funding to qualified small businesses. The report found oversight and monitoring of the awards was deficient and that a quarter of awards included improper payments.

"Government-supported scientific research and innovation is one of the keys to our country's future economic growth. We can't afford to lose any of our precious research and development dollars to waste, fraud or abuse," said Senate Commerce Committee Chairman Jay Rockefeller (D-W.Va.) in a statement that urged NASA to quickly implement the IG's recommendations.

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Two leading House Democrats want to know if American troops would be "imperiled" if lawmakers failed to increase the statutory debt ceiling.

The Obama administration has already warned of dire economic consequences if the $14.3 trillion ceiling isn't raised soon, and now Reps. Barney Frank (D-Mass.) and Norm Dicks (D-Wash.) want to know what would happen to the U.S. military if the government hit that limit. Frank is the ranking member of the House Financial Services Committee, and Dicks is the ranking member on the Appropriations Committee.