Debt, funding fights show no signs of easing for new Congress

The bitter partisan fights on taxes and spending that dominated the past Congress — highlighted by the “fiscal cliff” battle — likely will continue to boil this year.

Several big money issues left by the previous Congress are coming due in a few weeks, most notably automatic across-the-board spending cuts, an expiring stopgap measure to fund federal agencies and the need to find more space under the government’s encroaching debt ceiling.

With President Obama’s budget due in February and broader tax reforms on everyone’s to-do list, 2013 is shaping up to be a busy year for congressional appropriators and tax writers.

Yet whether lawmakers can rise above the partisan fray and pass any long-term and meaningful fixes is anyone’s guess.

Among the first major fiscal challenges facing the 113th Congress is how to avoid the “sequester” spending cuts scheduled to kick in March 1. The series of cuts in federal spending — delayed two months as part of the eleventh-hour deal to avoid the fiscal cliff in the new year — would reduce the budgets of most agencies and programs by 8 percent to 10 percent.

The cuts were conceived in the 2011 debate over the debt ceiling with the idea that instituting a “trigger” of such deep, indiscriminate across-the-board cuts would force both parties to work together to find better ways to attack the problem of the federal debt and deficit.

Both parties loathe the sequester, though for different reasons. Republicans insist on cuts in expensive entitlement programs such as Medicaid while resisting defense cuts. Many Democrats are open to trims in Pentagon spending but are fiercely protective of social welfare and entitlement programs. Neither side has shown a willingness to budge.

Funding challenge

Lawmakers also must figure out a way to keep the federal government funded through the year or risk a politically perilous government shutdown. Congress failed to pass a yearlong spending plan last year, forcing lawmakers to implement a six-month stopgap — known as a continuing resolution — in late September in order to avert a government shutdown when the current fiscal year began Oct. 1. That temporary measure expires March 27.

House and Senate appropriations committee leaders say they are determined to craft and pass a spending plan for the rest of fiscal year 2013, which ends Sept. 30. Republicans particularly abhor stopgap measures because they generally keep spending rates at the status quo, robbing them of an opportunity to cut what they consider to be wasteful, redundant and obsolete programs.

“Funding the government in short increments — without addressing the details for each program — is not the right way to govern and not something that should be common practice,” House Appropriations Committee Chairman Hal Rogers, Kentucky Republican, said on the chamber floor last year.

But with partisan gridlock showing no signs of abating, speculation persists that the new Congress simply will extend the temporary spending measure through September instead of doing the heavy lifting needed to create a new plan.

Without a budget

Meanwhile, Congress is required by law to pass a budget for fiscal year 2014 by April 15, then write the annual spending and tax laws to carry out the budget’s targets.

That didn’t happen in 2012 for the third straight year, as Senate Democrats refused to take up the House Republican-drafted budget while failing to offer a plan of their own. The last time the Senate passed a budget was in 2009, when Democrats controlled both chambers of Congress and the White House.

The president’s annual budget is due in February, though it is unlikely that it will gain much — if any — traction, as both houses of Congress overwhelmingly rejected the president’s proposal last year.

Also looming is the federal government’s self-imposed borrowing limit, which is expected to be reached by late February.

Republicans generally want a dollar of spending cuts for every dollar that the so-called debt ceiling is raised. Democrats accuse Republicans of holding the economy hostage because the financial markets likely would nose-dive if the government exceeds its borrowing limit and defaults on its loans. Mr. Obama has vowed not to bargain with lawmakers over a debt ceiling increase — as he did in the summer 2011 standoff — but will be hard-pressed to impose his will on Republicans.

The new Congress also will be pressed to deal with renewing the payroll-tax “holiday” that expired for more than 160 million American workers at the end of 2012.

The 2 percentage point Social Security tax cut allowed a worker earning $50,000 to keep about an extra $19 a week. Mr. Obama pushed for the tax cut in 2010 as a way to increase workers’ take-home pay to help boost consumer spending and provide a spark for the economy. The initial tax cut was for only a year but was extended through 2012.

Despite Republicans’ appetite for tax cuts, many in the party question whether the payroll cut did much to stimulate the economy. They also said they were concerned that it threatened the independent revenue stream that funds Social Security.