In their newsletter this week, the National Low Income Housing Coalition included this update on the fiscal crisis. TThe week of December 10, 2012 closed without agreement between President Obama and House Speaker John Boehner (R-OH) on how the nation should address its imminent fiscal challenges and averts the fiscal cliff. The leaders have just two weeks remaining before 2012 tax issues and 2013 sequestration implementation needs to be resolved.
As background, the term fiscal cliff encapsulates the potential economic decline the nation could face if a solution is not found to the end-of-year expiration of the Bush-era tax cuts, the start of sequestration in 2013 and the simultaneous expiration of other tax provisions and benefits at the end of 2012.
The Budget Control Act of 2011 (BCA) required the sequestration of discretionary funds for 10 years starting in FY13, which means making across-the-board cuts to achieve a $1.2 trillion reduction in the deficit over a 10-year period. If sequestration is allowed to take effect on January 2, 2013, affordable housing programs at HUD would be cut by 8.2%.
In late November 2012, the President released a two-part plan to close the remaining $3 trillion deficit gap addressed by the BCA, avert sequestration and address end of the year tax extensions; the plan was immediately opposed by Republicans. Speaker Boehner then released a counter-proposal to address the fiscal cliff that ignored the principles in the plan set forth by the President and Democratic leaders.
The Republican plan includes several hundred billion dollars in additional cuts to discretionary funding. The Center on Budget and Policy Priorities (CBPP) reported on December 12. 2012 that the House Speaker’s proposal could result in cuts to non-defense discretionary (NDD) programs that would actually be deeper than those imposed by sequestration.
Indicating that the President and Republicans are not close to reaching an agreement, Speaker Boehner announced that the House would not recess the week of December 17, 2012 as planned but will instead stay in session, with a break for Christmas. With significant additional discretionary cuts proposed by Republicans and no indication that agreement is imminent, it may take Congress longer than the few remaining days of the year to craft a grand bargain that includes replacing sequestration.
If Congress does not reach agreement and sequestration takes effect, HUD will begin to make plans regarding sequestration implementation. It is not clear how far into 2013 Congressional negotiations could proceed before the effects of sequestration would be felt by constituents.