–Budget Due Feb 14, CBO Releases Economic/Budget Report Week of Jan 24
–Congress Begins Year Finishing FY11 Budget, Preparing For FY12 Budget
–Analysts Say Obama, Rep. Ryan, Sen. Conrad Budgets Will Be Key

By John Shaw

WASHINGTON (MNI) – While some preliminary positioning has already
begun, the year’s fiscal debate will begin in earnest when President
Barack Obama delivers his State of the Union address January 25.

The president is expected to focus heavily in the speech on
economic themes, including the need to generate jobs now and to cut
budget deficits in the future.

Obama is also very likely to discuss tax reform, signalling a
desire to work with members of both parties on comprehensive tax reform.

It is unclear if Obama is inclined to try to move first on
corporate tax reform or whether he would prefer to include it as part of
a comprehensive plan to overhaul the nation’s tax code for the first
time in 25 years.

Perhaps in an attempt to get out in front of the issue, House Ways
and Means Committee Chair Dave Camp said Thursday his committee will
hold its first hearing on comprehensive tax reform next week,

He said the hearing Jan. 20 will be the “beginning of a dialogue”
on how to fix the tax code.

Camp did not say how he would like the code to be rewritten, but
noted that the U.S corporate tax rate is one of the highest in the
world.

The Senate Finance Committee began its hearings on tax reform last
year.

The same week that Obama delivers his State of the Union address,
the Congressional Budget Office will release its new 10-year budget and
economic report, which will provide updated economic growth estimates as
well as budget deficit projections for the next decade.

Obama’s fiscal goals will be fleshed out on Feb. 14 when he
releases his fiscal year 2012 budget, which will also have multi-year
deficit and economic projections.

Budget experts are in near total agreement that the key fiscal
events this year will be the release of Obama’s budget in mid-February
and the budget plans introduced in the early spring by Sen. Kent Conrad,
the Democratic chairman of the Senate Budget Committee, and Rep. Paul
Ryan, the Republican chairman of the House Budget Committee.

It is unclear how the work of several budget panels late last year
will shape the president’s new budget as well as the fiscal plans of
Conrad and Ryan.

The two co-chairmen of the National Commission on Fiscal
Responsibility and Reform, former senator Alan Simpson and former White
House chief of staff Erskine Bowles, have said they believe their
deficit reduction plan has reshaped the nation’s fiscal debate.

Democratic Sen. Mark Warner and Republican Sen. Saxby Chamblis have
said they will introduce legislation this year to implement the
Simpson-Bowles report.

The Simpson-Bowles plan called for about $4 trillion in deficit
reduction between 2012 and 2020. To achieve this, they call for $1.6
trillion from discretionary savings, $556 billion in entitlement
savings, $785 billion by scaling back so-called “tax earmarks,” and $673
billion in interest savings.

The plan would bring the federal budget deficit down to 2.3% of
gross domestic product by 2015. It would reduce the nation’s debt to 60%
of GDP by 2023 and to 40% of GDP by 2035.

The plan calls for fiscal changes to bring federal spending down to
about 21% of GDP and boost revenues to bring them up to 21% of GDP.

In a briefing last week, Ryan signalled that he sees little hope
for a broad fiscal agreement between Congress and Obama before the 2012
presidential elections, but said progress can be achieved on spending
controls as lawmakers and the White House complete the 2011 fiscal year
budget and consider the FY12 budget.

The FY11 stop-gap spending bill that is funding the federal
government expires March 4. House Republican leaders have said they
would like to cut at least $60 billion in projected FY11 spending as
part of the effort to complete work on the FY11 budget.

Treasury Secretary Tim Geithner sent a letter to congressional
leaders last week saying the statutory debt ceiling needs to be
increased as early as March 31 and by the middle of May.

Last week, Treasury said the U.S. debt is at $13.95 trillion,
leaving a cushion of $335 billion below the $14.29 trillion debt
ceiling.

It remains unclear if the debt ceiling will be increased in the
context of completing work on the FY11 budget.

** Market News International Washington Bureau: (202) 371-2121 **

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