Fiscal Cliff Solution? It’s Anyone’s Guess.

It has been a half century since the Cuban Missile Crisis when, according to many historians, the world came as close as it ever has to a full nuclear war.  At one point during that 13-day crisis the Soviet Union ships stopped short of the U.S. embargo line, delaying the first chance at military confrontation.  “We were eyeball to eyeball and the other guy just blinked,” Secretary of State Dean Rusk commented at the time.

One of the biggest challenges in the pending budget/tax negotiations is to come up with an agreement whereby neither side is able to claim that the other guy just blinked. As a result, there are probably as many reports in Washington claiming positive movement on a deal as there are negative reports that time is running out.

The terms of a spending agreement, or the failure to achieve one, affect federal funding for most aspects of youth and family services. Temporary Assistance to Needy Families and the IV-E entitlement program, both vital to state and county child welfare systems, are protected from across-the-board cuts.

The big worry isn’t that all the tax increases and automatic cuts and various other expirations will take place and remain in place forever.  The greater fear by some is that no deal by Dec. 31 will once again slow down the economy just as it appears to be gaining ground.  This would theoretically occur for a number of reasons: people not spending as usual during the key holiday shopping season, the IRS not disbursing refunds early next year to low- and middle-income families because they won’t be able to accurately produce tax forms; and loss of unemployment benefits.

Members on the Republican side have talked about increased revenue and breaking of old anti-tax pledges, there seems to be a strong resistance to raising the top tax rates back to the 39.6 percent rate that existed at the end of the Clinton Administration.

On the Democrat’s side, while there was an acknowledgement to accept cuts in programs including entitlement, there seemed to be a hard line in the sand against doing anything to the three biggest entitlements: Social Security, Medicare and Medicaid.  The Administration put on the table via the Secretary of Treasury Tim Geithner a proposal that increased tax revenue by $1.6 trillion with about $1 trillion coming from a restoration to a top rate of 39 percent with the rest coming from future tax reform, cuts of $400 billion in Medicare, a $50 billion stimulus,  and an extension of unemployment insurance and cuts in mandatory non-entitlement spending.  The Republican leadership through Speaker John Boehner (R-OH) and Senate Minority Leader Mitch McConnell (R-KY) rejected the proposal, basically saying it was not a new offer from the President.

By week’s end here is one possible scenario for compromise that some have discussed as possible:

Instead of the $1.6 trillion in tax revenue sought by the President or the $800 billion sought by Republicans, the difference is split at around $1.2 trillion.  The tax revenue is generated with an increase short of the 39.6 percent it was at the end of the Clinton Administration with the rest of the revenue generated by tax deduction eliminations as the Republicans have been promoting.

This might all be tied to an agreement that future tax reform would have to accomplish as much revenue with rates and deductions set accordingly.  The entitlement cuts would start with savings mainly from Medicare with a small down payment now and future reductions spread out late into the ten-year budget cutting period, not unlike the way Congressman Paul Ryan spread out his Medicare cuts a long way off in his House budget proposal earlier this year.

That could be the broad outlines of a deal…and then again, it may not happen.

Legislation Still Waiting For the Big Deal: VAWA, Agriculture, Appropriations

Some of the big pending issues in the lame-duck congress are likely waiting on a deal on the cliff perhaps in the hope that it can all travel together legislatively or that a final deal on the budget allows Congress to focus on moving final unfinished business.  While cliff negotiations are pending, Congress has been using its time to sometimes pass lesser legislation such as naming various federal buildings, selecting committee leadership and addressing bills that are not controversial. The Senate has been working on a Defense Department reauthorization (which passes each year).  Earlier the Senate failed to pass a non-controversial hunting bill.

In regard to reauthorization bills one of the key bills waiting for action is the Violence Against Women Act (VAWA).  There have been some behind the scenes discussions but no breakthrough yet.  The bill has been passed the Senate and House and is awaiting a conference committee. The two bills (HR 4970/S 1925) have three areas of significant difference: tribal authority to prosecute non-Indian men who abuse Indian women, the number of visas that are issued to undocumented immigrant women who are victims of domestic violence, and Senate language that formally extends the law to cover domestic violence when it involves issues of gender identity and sexual orientation. The Agriculture reauthorization (farm bill) yielded some progress when the Secretary of Agriculture Tom Vilsack brought the key committee leaders together for a positive discussion.  In addition to farm programs the farm bill includes funding for the Supplemental Nutrition Assistance Program (SNAP/food stamps).  Finally there is still hope that a final deal on the cliff will allow appropriators to push through the rest of the FY 2013 appropriations which is currently funded at 2012 levels through the end of March but there has been no movement on this front either.

SSBG and Disaster Relief

As states on the East Coast hit by hurricane Sandy assess the damage and make their requests for emergency relief – states of New Jersey and New York are requesting and need tens of billions of dollars in new federal funds to help rebuild – the president and Congress may look to an old source of help: the Social Services Block Grant (SSBG).  SSBG, the entitlement block grant to states, which has been targeted by the House of Representatives for complete elimination.

The block grant has been a useful tool for emergency relief. In 2005, in the hurricane Katrina and Rita aftermaths funding of $550 million was appropriated through SSBG to help not just the states that were the biggest victims of the hurricanes (Louisiana and Mississippi), but the surrounding states that were taking in evacuees.

States were given additional flexibility to spend the funds as Congress would amend the law again to extend the states time frame to spend the dollars. In the case of these hurricanes all fifty states were eligible for some of the funding based on a formula that used Federal Emergency Management Agency (FEMA) data to determine where hurricane victims had moved but the bulk of the funding went to the Gulf Coast states.

Louisiana received $221 million, Mississippi received $128 million and Texas, Florida and Alabama received $88 million, $54 million and $28 million respectively. SSBG was used again for 2008 disaster relief (passed as part of FY 2009 appropriations) when Congress again provided $600 million, some of this funding was to reinforce Katrina/Rita funding but the bulk of it, $450 million, was for all states hit by various natural disasters in 2008.

Numbers Set, Both Houses Settle on 2013 Schedule

The final numbers for the House of Representatives were set last week when a final race was called in the state of North Carolina.  As a result, the 2013 House will have 234 Republicans and 201 Democrats.  That is a net gain of eight seats for the Democrats.

There are two remaining seats to be settled, one in Louisiana where two Republicans are in a run-off and an open seat in Illinois with the resignation of Congressman Jessie Jackson Jr (D-Ill.).  Neither election will change party affiliation.  A second significant development last week was that the Senate and House released their calendars for next year and unlike last year, they have now gone back to matching schedules. Last year the House and Senate took different breaks and as a result, there were very few weeks throughout the year when both houses were in session.

UPCOMING CAPITOL HILL BRIEFINGS/EVENTS

  • National Foster Care Coalition, Quarterly Meeting, Thursday, December 13, 1:00 to 4:00 PM EST. Voices for America’s Children, 1000 Vermont Ave, NW Suite 700
  • National Child Abuse Coalition, semiannual in-person meeting, Tuesday, January 8, 2013—9:30 EST—4:00 EST, Location: Futures Without Violence, 1600 Connecticut Ave suite 501 (actual conference room suite 500, Human Rights Watch)
  • Presidential Inauguration, Monday, January 21, 2013 (private swearing-in Sunday, January 20)
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