The final year of the 112th Congress marked a continuation of the ongoing struggle between the Republican-controlled House and President Obama and the Democratic-controlled Senate over how to deal with the country’s federal deficit. This struggle took a number of forms: budget resolutions, the appropriations process, the continuing resolution (CR), sequestration, the debt ceiling, and the fiscal cliff. At the root of each of these clashes is a fundamental disagreement about how to bring the federal budget back into balance and to what extent increasing revenue, reforming entitlements, and cutting spending should play a role.
The year began with much uncertainty in the wake of the failure late in 2011 of the Congressional supercommittee tasked with crafting a deficit reduction plan that could pass both chambers. That failure triggered the countdown toward a round of across-the-board cuts to federal programs known as sequestration that were scheduled to go into effect in January, 2013 and would have a severe effect on funding for a number of children’s programs. The cuts, split evenly between defense and non-defense programs, were unpalatable to both parties, though an agreement about how to repeal or replace them remained elusive throughout the year.
Twice last year, in May and again in December, the House passed its plan to replace the scheduled defense cuts with additional cuts to non-defense programs, which included major cuts to Medicaid and elimination of the Social Services Block Grant (SSBG). Senate leaders and President Obama rejected that approach, preferring to include increased revenue in their deficit reduction approaches as opposed to solely balancing the budget via spending cuts. As 2013 begins, the sequestration cuts have been delayed until March, but a longer-term agreement to replace them has not yet been reached.
2012 ended with a partial resolution to the fiscal cliff the country was facing. Many of the tax issues, including the Bush tax cuts, the Alternative Minimum Tax, the Earned Income Tax Credit, the Child Tax Credit, and the Adoption Tax Credit have now been taken off the table. Still, a number of budget issues remain unresolved. As noted above, sequestration is still schedule to go into effect in March. The statutory debt limit is due for another increase in the next couple of months to prevent a U.S. default on its loan obligations. The CR the federal government is operating under also expires in March and funding for the final six months of Fiscal Year 2013 needs to be appropriated. Finally, negotiations between Congress and President Obama will likely resume shortly on a long-term deficit reduction plan. All of these looming pressure points highlight the continued vulnerability of federal discretionary and entitlement programs critical to children and families, and the need to maintain vigilance in our advocacy efforts in the year ahead.