The latest updates from our Washington DC insider
President Trump’s schedule (EST):
8:00 AM: Speaks at the 2019 National Prayer Breakfast;
11:45 AM: Daily intelligence briefing;
12:45 PM: Lunch with Secretary of State Pompeo; and
1:45 PM: Signs a Memorandum to Launch the “Women’s Global Development and Prosperity” Initiative.
Next Monday, President Trump will speak on border security from El Paso, TX.
“Congressional negotiators seek contours of border deal as shutdown looms.” Last night’s Washington Post article led with:
Congressional negotiators worked toward a deal Wednesday that could increase fencing along the U.S.-Mexico border without delivering President Trump the wall money he wants, as pressure built to reach agreement ahead of a government shutdown deadline next week.
A bipartisan committee of House and Senate lawmakers traded offers behind the scenes, with Democrats saying money for border barriers was on the table and Republicans acknowledging they won’t get Trump the $5.7 billion he has sought for his wall.
Lawmakers hope to have a tentative deal by Friday or soon thereafter, to allow time for the legislation to pass the House and Senate by Feb. 15. That’s when funding will run out for a large portion of the federal government, causing another partial shutdown, if Congress and Trump don’t act first.
I remain guardedly optimistic that Congress will produce a compromise that will avoid another government shutdown. The key will be finessing The Wall funding. If President Trump doesn’t find that acceptable, then it will be up to Senate Majority Leader McConnell to decide whether to override a veto.
Speaker Pelosi will support whatever bipartisan deal the conferees report. This morning’s The Hill article, at the end, reported:
Pelosi said she urged Pence, who sat next to her during Tuesday’s State of the Union, to keep the White House from interfering in the border security talks.
“I spoke to the Vice President and I told him that I hope that the White House will have the same hands-off policy as I have vis-a-vis the appropriators. Let them come to their own conclusion,” Pelosi said.
“I spoke with Sen. Shelby I told him whatever you all come to agreement on, bipartisan agreement, I will support,” Pelosi said. “I hope that the administration would have the same attitude and respect for the appropriations process.”
This isn’t any concession on Mrs. Pelosi’s part. The key will be whether conference committee Republicans can get Jared Kushner and the White House to back any compromise, and, after that, whether President Trump balks.
“Mulvaney invites bipartisan group of lawmakers to Camp David.” Tuesday afternoon’s Politico scoop led with:
Acting White House chief of staff Mick Mulvaney has invited a small bipartisan group of lawmakers to Camp David on Friday for what administration aides are describing as a casual gathering.
It’s the second time in recent weeks that Mulvaney has invited lawmakers to Camp David, although this is the first session that includes Democrats, according to administration officials.
That Mulvaney is even asking Democrats to Camp David is significant, since the Trump administration has practically no relationships with the new House majority, which is looking to probe President Donald Trump and his inner circle.
Trump is not planning to attend the get-together.
“It’s renewing old relationships and fostering new ones,” said a White House official speaking on the condition of anonymity. The official declined to say which lawmakers had been invited.
I take this as a good sign toward avoiding another government shutdown.
“Will Senate GOP try to pass a budget this year?” This morning’s The Hill article leads with:
Senate Republicans are divided over whether to pass an annual budget, with some lawmakers arguing it’s a waste of time and could become a political liability if vulnerable members of their conference are forced to cast tough votes.
Senate Budget Committee Chairman Mike Enzi (R-Wyo.) says he plans to move ahead with a budget resolution, but he has yet to receive confirmation from the GOP leadership that it will actually get to the floor.
“It obviously would be challenging and of course I think the broader question is, is there any budget the Senate could pass that would reconcile with the House?” said Senate Republican Whip John Thune (S.D.). “The idea that we would ever get a budget resolution that we could conference with the House I think would be a long bet.”
The budget process is dead, and no reform will revive it. It will only come back to life after a less polarized electorate demands it.
“Wildfires, hurricanes and other extreme weather cost the nation 247 lives, nearly $100 billion in damage during 2018.” Yesterday’s Washington Post article led with:
The number of billion-dollar weather disasters in the United States has more than doubled in recent years, as devastating hurricanes and ferocious wildfires that experts suspect are fueled in part by climate change have ravaged swaths of the country, according to data released by the federal government Wednesday.
Since 1980, the United States has experienced 241 weather and climate disasters where the overall damage reached or exceeded $1 billion, when adjusted for inflation, according to data from the National Oceanic and Atmospheric Administration. Between 1980 and 2013, according to NOAA, the nation averaged roughly half a dozen such disasters a year. Over the most recent five years, that number has jumped to more than 12.
“Why CBO Will Not Publish the Monthly Budget Review for January 2019.” Yesterday’s Congressional Budget Office press release stated:
The Congressional Budget Office will not publish the Monthly Budget Review for January 2019 because some data that CBO would have used to produce the report were unavailable as a result of the federal government’s partial shutdown from December 22, 2018, to January 25, 2019. The report ordinarily would have been released on February 7, 2019, the fifth business day of the month.
Each issue of the Monthly Budget Review reports CBO’s estimates of federal spending and revenues for the prior month and for the fiscal year to date. CBO was unable to make those estimates for the January 2019 report because data ordinarily supplied by several federal departments and agencies were unavailable. The Treasury Department, for example, has not yet published the Monthly Treasury Statement for December 2018.
CBO also does not yet have sufficient data from other federal departments and agencies to accurately estimate their spending in January. The precise changes in federal activities resulting from the shutdown—including the extent to which unfunded agencies continued to make grants or how quickly normal activities will be restored now that funding has resumed—are not known. In addition, the timing of back wage payments for excepted and furloughed federal workers is still uncertain. CBO expects that most such payments probably occurred in January, but some may have lagged into February.
CBO’s most recent estimate of the federal deficit for fiscal year 2019—$897 billion, or 4.2 percent of gross domestic product—was published on January 28, 2019, in The Budget and Economic Outlook: 2019 to 2029. The same day, CBO released a report providing estimates of the shutdown’s effects on the federal budget and the economy (see The Effects of the Partial Shutdown Ending in January 2019).
Depending on the availability of information, CBO will return to its regular publishing schedule with the release of the Monthly Budget Review for February 2019 on March 7, 2019.
IRS is suffering the loss of valuable employees, and it can’t replace them. Just because the shutdown is over doesn’t mean IRS operations will return to normal anytime soon as noted in yesterday’s Tax Policy Center blog.
“Financial Security in Retirement: Innovations and Best Practices to Promote Savings.” Yesterday’s Senate Aging Committee hearing (video) highlighted the increasing likelihood that Americans will outlive their retirement savings. In particular, Comptroller General Gene Dodaro called for “establishing an independent commission to comprehensively examine the US retirement system and make recommendations to clarify key policy goals for the system and improve how the nation promotes retirement security.” He stated:
Fundamental changes over the past 40 years have led to various risks and challenges for the three main pillars supporting the U.S. retirement system. For example, current projections indicate that by 2034, the Old-Age and Survivors trust fund for Social Security’s retirement program—the first pillar—will only be sufficient to pay 77 percent of scheduled benefits, due in part to the aging of the population (see figure). Other federal government retirement-related programs also face financial uncertainty. For example, the Pension Benefit Guaranty Corporation, which insures the pension benefits of most private sector defined benefit plans, estimates a greater than 90 percent chance the multiemployer program will be insolvent by 2025. Meanwhile, employer-sponsored plans—the second pillar—have experienced a shift from traditional defined benefit (DB) plans that generally provide set monthly payments for life, to defined contribution (DC) account-based plans, like 401(k)s. DC plans provide greater portability of savings that can be better suited to the needs of a more mobile workforce, but also require individuals to assume more responsibility for planning and managing their savings. While DC plans can provide meaningful retirement security for many, especially higher earners, lower earners appear more prone to having little or no savings in their DC accounts. Further, individuals’ savings—the third pillar—may be constrained by economic trends such as low real wage growth and growing out-of-pocket health care costs. Combined with increased longevity, these challenges can put individuals at greater risk of outliving their savings and fiscal pressures on government programs will likely grow.
I’m very concerned about the pension time bombs about to go off. At the top of the business cycle, when Congress should be addressing looming pension plan failures, Congress instead has given us trillion dollar annual deficits and the demise of the Budget Act.
2020 Election: Can the Democrats unite behind one candidate? While Republicans will face voter anger over shutdowns, job-killing tariffs, and overreach on conservative social issues, it’s far from clear that Democrats can unite behind one candidate as described in this morning’s FiveThirtyEight analysis. I doubt President Trump could be reelected, but most Democratic candidates are way left of the voters, so the 2020 presidential race may depend on whether a viable Republicans can win the nomination while Democrats split their voters. Also, at this point, it looks like the Republicans can hang onto the Senate while the Democrats retain control of the House.
Pete Davis is an economist who worked on the tax and budget committees of Congress for 11 years and who follows Washington for money managers.
