It’s Not Over Yet: More Looming Debt Crisis Deadlines
The bipartisan battle over the debt crisis is far from over. With no deal in sight, Congress faces two major deadlines with long-term repercussions in the next few weeks — and another debt-ceiling time bomb in the coming months.
March 1: Sequestration
Because the two parties couldn’t decide on a budget, Congress in August 2011 passed a law with a self-destruct mechanism to force an agreement. The Budget Control Act required Congress to agree to reduce the deficit by $1.2 trillion by the end of 2012 or face deep, across-the-board spending cuts for a decade that would be painful for both parties, also known as sequestration. Congress set up a super-committee to come up with a plan before the deadline. They failed, and the sequester was triggered on Jan. 1, 2013.
Starting this year and continuing through 2021, the Office of Management and Budget, which is responsible for appropriating funding, must slash billions across the board. For 2013, the total cuts will total about $109 billion, split evenly between defense and domestic spending. (Wars, Medicaid, and other programs like Social Security are exempt.)
How To Stop It: Congress must pass a budget with $1.2 trillion in cuts to replace the automatic spending cuts by the due date, March 1. But it’s difficult to see how the two parties might compromise on a plan. Democrats have proposed eliminating farm subsidies and applying a minimum tax rate on millionaires, which Republicans oppose. Republicans want to preserve defense spending but cut more domestic programs that Democrats support.
March 27: The Continuing Resolution
The last time Congress passed a budget was in 2009. Since then, in order to keep the government functioning, Congress has had to approve a series of continuing resolutions, which allow the government to continue payments largely in line with the last budget, at least for a few months. The current continuing resolution, which was put in place Oct. 1, expires at the end of March.
What Will Happen: Congress must sign off on a new budget — or pass another continuing resolution by March 27 — or face a potential government shutdown.
August: The Debt Ceiling
The U.S. hit its debt ceiling at the end of 2012. Since then, the Treasury Department has been using what’s known as “extraordinary measures” to borrow extra cash to keep the government running.
On Feb. 4, President Obama signed a bill that suspends the public debt limit until May 18, allowing the government to continue to borrow money without worrying about the debt. The next day, the debt ceiling will kick back in at a higher level, estimated at about $450 billion. The government now won’t be in danger of defaulting on its debt again until August, according to the Bipartisan Policy Center.
What Happens Next? The bill to suspend the debt limit also included a stick for members of both houses of Congress if they fail to pass a budget. Beginning on April 16, if there is no deal, their salaries will be held in escrow accounts until the session of Congress ends in 2015.