More Fiscal Cliffs On The Way
The December 31st Fiscal Cliff is only the beginning of the “drop dead” dates the economy will face this year:
1. Debt Ceiling: Congress has to raise the debt ceiling soon. Real soon.
On Monday, Treasury Secretary Tim Geithner made it official: Federal borrowing has reached the $16.394 trillion debt ceiling.
The Treasury Department, which runs the government’s debt-issuance operation, can create about $200 billion of headroom by employing what it calls “extraordinary measures.” That normally could cover about two months’ worth of borrowing, although continuing uncertainty about tax rates and spending make it hard to determine precisely how long the extraordinary measures will last.
Deadline: Late February or early March.
What’s at stake: Last year, political brinksmanship over the debt limit led to thedowngrade of the country’s credit rating, roiled stock markets and raised questions about the country’s willingness to pay all of its bills on time. It also wasted $1.3 billion because of the uncertainty it wrought on the complex task of federal borrowing.
2. Sequester: The so-called sequester is a series of automatic cuts in federal spending that will reduce the budgets of most agencies and programs by 8% to 10%.
The cuts were born of the epic 2011 fight over the debt ceiling. The idea was to create a “trigger” so onerous and indiscriminate that both parties would have an incentive to devise a smarter way to reduce deficits. Instead, 17 months later, Congress is considering a deal that would set up yet another deadline.
Deadline: Bill would postpone many of the Jan. 2 cuts by two months.
What’s at stake: The spending cuts as laid out in 2011 would ripple out across thousands of federal programs and projects and, the White House budget office said in September, “would have a devastating impact on important defense and nondefense programs.”
3. Continuing Budget Resolution: The federal government works on a fiscal year that starts every Oct. 1. Problem is it has been years since it actually enacted a real budget on time.
There’s a process for enacting a budget: Congressional committees are supposed to hold hearings. Experts and interested parties testify about proposals. Lawmakers deliberate over the right spending levels for each federal agency and then roll it all up into a budget.
But Congress rarely ends up following that process. Instead, it usually passes short-term“continuing resolutions,” which is fancy way of saying “Band Aid solution.”
Deadline: The current continuing resolution expires on March 27.
Now, of course, the logical thing to do would be for the 113th Congress, which convenes on Thursday, to deal with all these matters at once. That would be adult thing to do, after all, and it would minimize the possibility that further fiscal shenanigans on Capitol Hill will spook the stock market and the business world. Of course, this is America, and we can pretty much guarantee that each and every one of these cliffs will be approached the same way the recently expired one was. Both sides will engage in months of partisan name calling and then, when there’s only about a week or two left, Washington will go into panic mode and we’ll end up with another crappy last minute deal. That’s how we do things around here, and there’s no reason to think that the 113th Congress will be any different from the 112th.