Larry Jones
August 6, 2012

With the end of the fiscal year fast approaching and none of the appropriations bills anywhere near completion, Senate Majority Leader Harry Reid (NV) announced on July 31 that he and House Speaker John A. Boehner (OH) have reached agreement on a deal to keep the federal government and federal programs funded through March 31, 2013. This action should eliminate the threat of a government shutdown, which could have anger voters before the November elections. But it is just one of several critical actions Congress must grapple with before the end of the year. Still remaining are: what to do about extending the Bush era tax cuts, the payroll tax cuts, the alternative minimum tax cut; and what can leaders agree on to avoid sequestration or automatic across-the-board spending cuts.

Under the deal discretionary spending, which includes both defense and domestic programs, would continue to be funded at an annual rate of $1.047 trillion, the spending limit agreed to in last year's deficit reduction law. This is $19 billion more than the $1.028 trillion approved by the Republican controlled House last March for discretionary spending in Fiscal Year 2013. To make up for the budget gap, the House bill called for the elimination of many programs and significant cuts in others including the elimination of the Community Development Block Grant program; and significant cuts in Head Start, student aid, Medicaid and Medicare.

House and Senate leaders are expected to work on specific language for the so called “continuing resolution” during the August recess so it can be ready to be considered and adopted by both chambers and signed by the President by September 30. After the November elections, the President and Congress are expected to consider both temporary and long term solutions to the expiring tax cuts, sequestration and other critical issues.