Friday, January 09, 2009


This Week in Washington

The new Congress has been sworn in and is ready to get to work. The big story is the economic recovery package, but the process is slower than leaders had hoped because members are challenging some of the details. So the leadership is looking for something else that can move quickly while the economic recovery negotiations continue, and the SCHIP reauthorization may fit the bill -- it could move next week. Details below!


Legislation to reauthorize SCHIP will likely move before the economic recovery package with votes anticipated next week in the House and possibly in the Senate as well. Hopefully the legislation will closely resemble the first vetoed bill from 2007 which passed with bipartisan support. Democratic leaders have indicated they would also like to include ICHIA (optional coverage for legal immigrant children) in the reauthorization. Keep an eye out for more details from us next week.

Action Steps. We would encourage you to reach out to members in the House to help bolster support.


The process for moving the economic recovery package has been slower than the leaders had hoped. While the Obama transition team and Congressional leadership have done significant work on many provisions, rank-and-file members are back in Washington, DC and are asking questions and asking for changes. Important decision-making meetings are occurring now, but the roll-out timeline appears to be slowing down.

Today’s jobless report puts additional pressure on Congress to act.

Cost. The target cost for the package is still about $800 billion over 2 years. About $300 billion of that is likely to be tax cuts, but that amount could increase in the Senate. The leadership is trying to prevent the package from becoming a free-for-all by insisting that provisions put money in the hands of consumers, help protect jobs and vital services, and help create jobs.

Committees. Some committee hearings are possible next week. The House and Senate Appropriations Committees, the House Ways and Means Committee, and the Senate Finance Committees are the most likely to hold markups. Floor consideration should follow fairly quickly after the committees act.

Floor. The House bill is not likely to be amendable. However, the Senate package will be fully amendable, so floor consideration could take a week or even two. Since different versions are likely to emerge, a conference is likely. The goal is to complete work by Presidents’ Day.

Key items. Our work is likely to focus on defending key provisions and warding off damaging amendments. Chances are good that the package will include:
· Substantial state fiscal relief (including no less than $100 billion in a temporary FMAP increase),
· Unemployment Insurance modernization,
· Temporary improvements in the refundability of the child tax credit,
· Temporary increases in food stamp benefits, and
· Improvements in the TANF contingency fund and other safety net programs.

Key threats. There is conern over attacks being mounted on several high-priority policies such as:
· State fiscal relief,
· Unemployment modernization,
· Improvements in the refundability of the child tax credit (CTC), and
· Improvements in other safety net programs.

There is also concern that some Senators will push for high-cost business tax credits that would not stimulate the economy and could force reductions in resources for higher priority provisions.


CBO now projects a deficit of nearly $1.2 trillion in the current fiscal year (2009) if there are no changes in policy. This does not include the cost of the economic recovery bill or other new legislation, or the additional funds needed for the wars in Iraq and Afghanistan (CBO’s baseline includes spending for the war at the level supported by funds already appropriated for 2009 — that $67 billion is less than half of what is needed to maintain current operations). That would be the largest deficit in history in nominal terms, and at 8.3 percent of GDP, it would be the largest deficit as a share of the economy since World War II (the previous post-war high was 6.0 of GDP in 1983).

The effects of the recession will fade over the next several years, so CBO’s baseline deficits will decline from the level projected for 2009. CBO projects that the deficit will decline to just over $250 billion in 2012 and remain fairly close to that level through 2019. But this assumes that there is no change in current laws, which means the 2001 and 2003 tax cuts are assumed to expire at the end of 2010 and no further relief from the AMT will be provided.

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