Never-Ending “Fiscal Cliff” Drama Set to Continue

After many weeks of negotiations over how to avoid going over the “fiscal cliff,” Congress approved a short-term solution after a last-ditch effort by Vice President Joe Biden and Senate Minority Leader Mitch McConnell (R-KY). Many people thought that a solution would not be agreed upon before the fiscal cliff deadlines, while others remained confident that policymakers would be able to work together. Ironically, both schools of thought were correct – Congress did not vote on the American Taxpayer Relief Act until January 1st, and President Obama did not sign it into law until January 2nd. Therefore, technically the country did roll over the “cliff” whilst still hanging on by a fingernail – the deadline for decisions on the tax cuts was December 31st, but the federal spending sequester was not scheduled for implementation until January 2nd. Essentially, the American Taxpayer Relief Act allowed the country to let go from that January cliff edge and drop relatively unscathed to a newly discovered ledge below only to teeter on the edge of another cliff.

The resulting solution to the “cliff” really was a compromise with legislators from both sides expressing concern and dissatisfaction over the deal, but the bottom line is that a perceived major economic meltdown was averted for the time being. The January 2013 “fiscal cliff” was comprised of potential increases in taxes, the automatic federal funding cuts associated with sequestration, and the need to address the nation’s debt ceiling again (the instigating factor that set the nation on a course towards the fiscal cliff). The “solution,” called the American Taxpayer Relief Act, is true to its name because it really only addressed the most pressing tax issue (expiring tax cuts) component of the January 2012 “fiscal cliff” – sequestration is still scheduled to occur (delayed two months) and the debt ceiling is still a topic of debate. Therefore, any relief from the “fiscal cliff” drama will be short-lived because many of the same problems persist without answers, only to be tackled in February and March of 2013.

With the implementation of sequestration cuts in federal funding pushed back until March 1st, Congress and the Obama Administration will have more time to hammer out a more permanent solution. Even though the sequestration cuts will be less than before (new revenues from the American Taxpayer Relief Act must be accounted for), they still involve larger systemic questions that have been recent sources of tremendous political posturing. While the end result could be characterized as bi-partisan, the preceding process was coupled with constant partisan rhetoric that played out via a consistent stream of press releases and announcements by those involved (as well as those who weren’t).

Brinkmanship has continued to get worse over the past few years. Will going over the “fiscal cliff” in January 2013 lead to tumbling off in a free fall in March? The next 49 days will surely be interesting…

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Sequestration: Ushering in a New Way for Programs to Lose Money?

Usually, funding for federal programming within the fields of workforce development, youth development, and education is determined through the appropriations process. During this process, members of the Congressional Appropriations Committees hear testimony by agency officials as well as outside experts to inform their decisions regarding funding for federal programs and activities.

Sequestration (for more information, see NYEC’s issue brief on sequestration), however, represents a very different approach to reducing funding for federal programming. Instead of cutting funding on a program-by-program basis according to a perceived decrease in need/effectiveness, sequestration will use the blunt instrument of across-the-board reductions in federal funding.  Besides the actual amounts cut from federal job training and education programs, this approach is significant because of its detrimental side effect for advocacy. Alternatives to sequestration are still possible, but the total amount that must be reduced will not change (unless federal revenues increase due to taxes), thus creating a zero-sum situation. All programs are connected, because lessening the cut for one program would increase the cuts to other programs.

Could reducing the budget through sequestration, be an indication for how funding is determined in the future? Will advocates and proponents for federal job training and education efforts be forced to choose between their programs or defense activities and national security? Considering a widespread desire among current lawmakers to avoid the sequestration cuts, this will likely not serve as a model for the future. However, some elements of sequestration could unfortunately still be applied on a smaller scale – instead of making non-defense programming compete with defense (like sequestration), non-defense programming could be singularly targeted for across-the-board cuts or tasked with reducing overall spending by a certain amount. This approach would create a competitive atmosphere, similar to the effects of sequestration, where service providers are pitted against each other in their attempts to save their programs.