Congress was on recess for the week of January 7, after the official convening of the 113th Congress on January 3. The House resumes its session the week of January 14 and the Senate comes back the week of January 21. As reported in Memo last week (see Memo, 1/4), lawmakers have just a few short weeks to act on the next series of financial crises: reaching the debt ceiling in February, the implementation of sequestration on March 1, and the expiration of the FY13 appropriations continuing resolution (CR) on March 27.
The raising of the debt ceiling, something that Congress has done routinely, is now being used by House Republicans to try to force spending cuts. This tactic caused the debt ceiling crisis in the summer of 2011 that led to a downgrade of the country’s credit rating and the sequester.
Republicans again are threatening to vote against raising the debt ceiling unless Congress cuts spending dollar for dollar to the amount the debt ceiling is raised. Several prominent Republicans have stated they are willing to allow the ceiling to be breached and risk the consequences to the economy. President Barack Obama says he will not negotiate on raising the debt ceiling and has called on lawmakers to assure that the federal government is able to pay its debts that have already been incurred through Congressional action. Some analysts think the Administration can raise the debt ceiling without Congressional approval if it has to in order to meet the country’s obligations. Several Democratic leaders are encouraging the President to do so.
H.R. 8, the bill passed by Congress in the waning hours of the 112th Congress, postponed the across-the-board cuts to discretionary funds, scheduled for January 1, until March 1. Unless Congress acts, the sequester will take effect, resulting in cuts needed to achieve a $1.2 trillion reduction in the deficit over a 10-year period. The Office of Management and Budget estimates that a full-year sequestration would result in 8.2% cuts to most non-defense discretionary accounts. One scenario under discussion is to simply keep postponing the sequester until the political environment improves and less drastic cuts can be negotiated.
Finally, Congress must settle funding levels for the current fiscal year, FY13, which started October 1, 2012. The federal government is currently funded at FY12 levels by a CR that expires on March 27. H.R. 8 set new spending caps for FY13. Appropriators now report a readiness to move forward with finalizing FY13 funding levels.
H.R. 8 also set new caps for the FY14 federal budget, which has not yet been made public. Although the President is required by statute to deliver his proposed FY14 budget request to Congress by the first Monday in February, it will be delayed due to lack of a FY13 budget and the uncertainty surrounding the sequester or a replacement deficit reduction measure.
The Center on Budget and Policy Priorities (CBPP) is holding a webinar on the various coinciding budget issues and what is at stake for low income housing and community development programs. The webinar will be at 3pm EST on January 29. Click here to register for this webinar.
CBPP has also issued a new report and commentary on the latest budget crisis.