By Larry Jones
July 2, 2012

During the June 13 luncheon session, Conference of Mayors Vice President Philadelphia Mayor Michael A. Nutter reminded delegates that since Congress failed to reach agreement on a deficit reduction plan last year many federally funded programs important to state and local governments face the real possibility of a budget sequestration that could involve a series of devastating budget cuts starting in January 2013. He further pointed out that despite strong bipartisan support, Congress has not been able to pass a transportation reauthorization bill or get very much else done this year. To help delegates understand what Congress is likely to do in the coming months, Nutter introduced a panel of political pundits who shared their views what's causing problems and what are some of the possible solutions.

Ron Browstein, Atlantic Media Company Political Director, served as moderator of the panel and opened the discussion by telling delegates that the last time the Republican leadership in the House, the Democratic leaders in the Senate and the President tried to reach agreement on raising the debt ceiling, it ended in a deadlock that shook the confidence in the public and the financial markets. "We have an even larger series of challenges that are coming together after the election. Is there any reason for optimism, that the two sides can more effectively bridge their differences and reach an agreement this time than they did on the debt ceiling?" he asked.

In response the first panelist, Heritage Foundation Vice President of Government Studies Mike Franc, reminded delegates that a recent Gallup poll found Congress' approval rating in the single digits, which is a reflection of just how dysfunctional Congress has become as an institution. He pointed out that with only 18 legislative days remaining before the Labor Day recess and 28 legislative days remaining before Congress plans to adjourn, not a lot is expected to get done. Commenting on two important pieces of legislation for cities, Franc said, "I think the odds of a farm bill being resolved are higher than a highway bill. I think the highway bill will get punted into next year."

Franc also spoke about a number of tax provisions that are set to expire at the end of the year, including the so called "doc fix" (physician's Medicare reimbursement rates), unemployment insurance coverage, the Bush era tax cuts and the payroll tax cuts. If these provisions are allowed to expire and the sequestration takes effect as scheduled on January 2, 2013 with automatic across the board cuts in defense and domestic programs, they are expected to have a devastating impact on the economy and state and local budgets. With all of the pending bills set to expire, Franc believes Congress will be forced to deal with all of these issues in one big package most likely after the November elections. He said the challenge "will be can you simultaneously satisfy Republicans who want to see changes in the tax code lead to more economic growth or at least have the tax code not be an impediment to growth and job creation; and satisfy on the revenue side the sense that we need changes that would not deprive the Treasury of enough revenues." He believes that can be achieved through a combination of lower rates and a broaden tax base.

The second panelist, Center for American Progress President Neera Tanden, reminded delegates that the 2008 and 2010 national elections pointed in the opposite directions and have "brought together majorities, policies and philosophies around governing that are really at odds." She pointed out that much of the bipartisan support that existed in the past during the presidency of George Bush on key issues like education funding, transportation, community development block grants, Medicare and Medicaid has disappeared. "That's why Congress has grind to a halt," she said. However, Tanden believes that a four percent shock in the GDP (the Congressional Budget Office estimates that eliminating the Bush era tax cuts would cause a two-quarter recession in 2013 and reduce the nation's GDP by four percent) may be enough to force Congress and the President to agree on a deal. She believes the key to Congressional leaders and the President being able to reach a deal will be a balanced approach to dealing with the deficit and national debt that include revenues and spending reductions. "There is bipartisan support for that in the country and there is bipartisan support for that amongst the parties. There has not been in the Congress because of the base of the Republican Party. But I do think you already are seeing a recognition that the Republican Party will have to position itself in a different way," she said.

Congressional leaders and the President being able to reach a deal will be a balanced approach to dealing with the deficit and national debt that include revenues and spending reductions. "There is bipartisan support for that in the country and there is bipartisan support for that amongst the parties. There has not been in the Congress because of the base of the Republican Party. But I do think you already are seeing a recognition that the Republican Party will have to position itself in a different way," she said.

Tanden thinks the most likely possible optimistic resolution will be for Congressional leaders and the President to reach agreement on a framework during the lame duck session that calls for some additional revenue and spending targets that will give them more time, maybe 6 months, to address the issues that are due to expire at the end of the year.

Franc said he believes initially there will be a lot of talk about trying to get something permanent done but at the end of the day "it will be a time sensitive resolution—a kick the can down the road solution, maybe it's six months or maybe it's a year. It will depend on how the Presidential and Congressional elections turn out. But I don't see them solving the world's problem in one fell swoop."