WASHINGTON (MarketWatch) — For Rep. Kevin Brady, the “sequester” just isn’t enough.
“I actually believe we ought to be looking broader and bolder” than the sequester, Washington shorthand for spending limits put in place by a 2011 budget deal, Brady, a Texas Republican, told MarketWatch in a phone interview this week.
With Congress and the White House hurtling toward a new confrontation over spending as the end of the fiscal year approaches on Sept. 30, Brady says Washington ought to “think bigger” than just caps on discretionary spending. Yet congressional Republicans and the Obama administration are still tussling over the caps as they’re now written, with the White House demanding they be lifted for domestic and defense spending and Republicans arguing for defense relief only. The government could temporarily shut down if the two sides can’t agree.
The vice chairman of the congressional Joint Economic Committee, Brady is also calling on the White House to negotiate over raising the U.S. debt ceiling — something the Obama administration has said it won’t do. “The sooner the White House sits down with Republicans and begins this discussion, I think the more certainty it’ll create going forward,” Brady said. This week, the Congressional Budget Office said the U.S. would hit the debt limit in mid-November or early December.
Also read: The next debt-ceiling battle may get pushed back to Thanksgiving.
Here is a condensed and edited interview with Brady, who also leads the House Ways and Means Committee’s subcommittee on health.
MarketWatch: The markets have seesawed in recent days and they’ve spooked investors. Are you planning to introduce any market-related legislation when you come back or do you think Congress is going to stay hands-off?
Brady: As related to the current stock market challenges? In a sense [we’re] already engaged. I think most experts have long predicted that at some point there’d be a fundamental shift in China’s economy, from sort of driving global growth to a much-slower economy. This is driven by massive overbuilding in China and the debt that goes with it. While the impact will be felt first in the developing countries, certainly U.S. investors are worried.
But here’s my point: America’s problem isn’t China. America’s problem is America. We have a business climate that just doesn’t attract the business investment or release the business investment that’s needed to get people back to work and get wages moving upward. Here we are six years after the recovery officially began, we’re still holding our breath from month to month on the jobs report. We should be just in a normal recovery, 5.7 million jobs ahead of where we’re at. A family of four ought to have an extra $1,001 per month back in their family budget at this point in the recovery.
As a country, we’ve got our fiscal policies wrong, especially allowing this uncompetitive tax code to go unchanged. We’ve got excessive regulation creating headwinds for new investments. I would argue our monetary policy and interest rates have been too low, too long, which really I think hurts savers and seniors. At this point, because the Fed has not been able to really establish clear forward communications to the market, they’re actually making it tougher for us to move forward by not normalizing.
MarketWatch: One thing that’s coming up very quickly is the end of the fiscal year. Congress hasn’t approved spending bills for next year. How worried should the markets and regular Americans be about another government shutdown come Oct. 1?
Brady: If we’re smart about getting our financial house in order in Washington and growing this economy, we will not flirt with any default or a government shutdown — but actually reach agreement on both how we’re going to fund the government for next year with the fiscal discipline, and tied to the debt ceiling, real spending caps going forward. I’m convinced we can do that. It won’t be easy in a very flammable political dynamic in Washington right now, especially leading into the presidential year, but I’m convinced we can do it.
MarketWatch: When you say spending caps going forward, do you mean keeping the sequester caps?
Brady: I actually believe we ought to be looking broader and bolder than that. Part of the weaknesses of the sequester caps is they really don’t go after wasteful spending. It just says across the board cuts [that are] especially harmful to our military. It ignores our largest programs, Medicare, Social Security, Medicaid, key programs like that that we need to address; both parties need to address to make them sustainable.
I’ve introduced legislation, the MAP act — it stands for Maximizing America’s Prosperity — that creates spending caps for all of government spending, of the spending that we control. It slowly, gradually reduces the size of the government relative to potential GDP. I’m convinced there is a bipartisan way to shrink the size of the government in a way that not simply balances the budget — we actually grow the economy because our government’s right-sized. We ought to think bigger than simply discretionary spending caps.
MarketWatch: How about on the debt ceiling? The White House wants a clean debt ceiling increase. Are you suggesting there be some conditions before Congress raises the debt ceiling?
Brady: I think the White House is dreaming that in a budget that still is overspending by nearly half a trillion dollars a year, that we don’t need serious spending discipline going forward. Certainly Republicans feel that way, the American public feels that this debt level is dangerously high. So the sooner the White House sits down with Republicans and begins this discussion, I think the more certainty it’ll create going forward.
MarketWatch: You’ve said you want to target some of the Affordable Care Act’s taxes in a bill when Congress returns. Are you any closer to deciding on what’s going to be included in the tax package you’re working on?
Brady: The short answer is no. We’re still noodling through the different options, looking at the space we’ve got in September and October as we’ve got the [continuing resolution] coming up and the highway bill and some major decisions on how we fund our military going forward. We’ve had discussions during August, but [we’re] not ready to announce anything yet.
MarketWatch: Finally, you’ve also said you want to start working on Medicare reforms. That’s quite a big goal. What are you aiming to get done this fall?
Brady: It is ambitious, granted, to make Medicare sustainable for the long term. But we’ve taken the first big step in solving how we pay our doctors, based on quality rather than the quantity of procedures, a significant move forward.
We’ve already begun to act on step two, which is really reforming the way Medicare reimburses others in the process, including medical treatments and evaluations leading into the hospital; inpatient care as well as outpatient care; and then post-acute care: nursing homes, long-term acute care hospitals, rehab hospitals, all those. We’re convinced that we can increase quality and make it more affordable, save dollars in the long run by focusing less on cost controls, mandates from [the Centers for Medicare & Medicaid Services] and micromanaging every moment of the health-care day, and instead relying upon competition, quality and more freedom for providers to practice in return for greater risks and rewards on their part.
What we’re hopeful for is that we can pull a package together this fall. Hopefully there is room to bring it to the House floor and to the Senate before the presidential election season overpowers everybody.
Step three is going to be probably the bigger challenge, which is really personalizing Medicare, including combining part A and B with an out-of-pocket cap and what I’d call personalized Medicare, or a “premium support” option.