July 02, 2012
Credit: Credit: Erin A. Kirk-Cuomo/U.S. Defense Department
Jen DiMascio Washington
Exactly how Congress will navigate the fiscal minefield it laid for itself between now and the end of the year is a mystery even to lawmakers. But that does not stop anyone in Washington from trying to influence the process or play it for political advantage.
Last August, lawmakers passed the Budget Control Act, which required the government to reduce the federal deficit by $1.2 trillion over a decade. Without a new congressional agreement, the government will face an across-the-board budget cut of about $1 trillion on Jan. 2, 2013.
Then, the entire federal government—from NASA to the FAA—will be in line for steep reductions. The Pentagon alone stands to lose $500 billion over 10 years, $53 billion of which will come due in January in a fashion that could cost the government move money in the long run, and force the nation into a double-dip recession.
But obtaining a deal will require lawmakers to reach an agreement on issues that most Congresses never want to touch. They will have to alter government health care entitlements for the elderly at a time when the country's population is aging and increase taxes when a large swath of Congress has signed pledges not to do so. And even issues that typically pass without notice—such as the bill to reauthorize the Export-Import Bank's lending authority—nearly failed.
Here is your guide to the positions and possibilities in play over the next six months, as the deadline for averting that penalty, known as sequestration, draws closer.
THE PUNT FORMATION Lawmakers interested in reaching a “grand bargain” to reduce the federal deficit—one that combines reductions in entitlement spending as well as tax increases—are quietly negotiating an agreement that could be attached to a spending bill that must pass before the fiscal year ends Sept. 30. That deal would not solve the deficit problem but would establish a framework for discussions on deficit reduction and other tax issues early next year, after the November elections have passed.