Waiting for the Mid-Session Budget Review

The White House is putting off issuing its mid-session budget review until after Congress goes on its August recess.  The mid-session review is the update to Congress that outlines how actual revenue and spending are matching up to the projections. It's almost always issued in mid-to-late July.  Delaying it until the recess raises suspsicions, as the AP puts it, that Obama is expecting bad news, and wants Congress as committed as possible to new spending before he unleashes it.

 Delaying a mid-session review is pretty rare.  The last time it happened was . . . 2001, when Bush was in his first year of office.  Presidential transitions are extremely disruptive. 

That doesn't mean it's unreasonable to think that there may be extremely bad news--for us, and for Obama's agenda--contained in the mid-session review.  Employment news is dismal, and ultimately, most of the federal government's tax revenue depends on income taxes.  Its other major source of income is capital income:  corporate income taxes, capital gains, dividends, and interest.  Well, corporate profits aren't good--the bounces in the stock market come from beating really dismal expectations, not from actually high levels of corporate income (Goldman Sachs, as ever, excepted).  No one's taking big capital gains this year.  Interest income is hard to come by when everyone's trying to stash all their money in money markets and treasuries.  And dividends are no longer the major income source they once were.

Meanwhile, the recession is putting big pressure on the government's spending.  There are states who need to be propped up, all manner of "automatic fiscal stabilizers" like unemployment, welfare, and Medicaid to pay for, and companies in need of bailouts.

So I expect that the news will be bad, and I further expect that the administration is hoping that bad budget news released in the August doldrums will have less impact than bad news slapping Congress in the face during health care negotiations.  But that doesn't mean that the administration is doing this deliberately.  Sometimes a delay in the mid-session budget review is just a delay in the mid-session budget review.

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Megan McArdle is a columnist at Bloomberg View and a former senior editor at The Atlantic. Her new book is The Up Side of Down.

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