Congress failed to avert the so-called fiscall cliff by Dec. 31. (Drew Angerer / Getty Images)
The nation is poised to take one step back from the so-called fiscal cliff that threatens big cuts in defense spending through sequestration. But the deal could potentially make automatic budget cuts even harsher on military programs if a deficit and debt agreement cannot be reached between Congress and the White House.
The American Taxpayer Relief Act of 2012, a bipartisan agreement reached New Year's Eve, extends individual, business and energy tax breaks and also extends unemployment benefits that were due to expire on Jan. 1. Supporters say the measure prevents income taxes from rising for 98 percent of taxpayers.
The Senate passed the bill on an 89-8 vote early New Year's Day, technically after the nation fell off the fiscal cliff, which reverted tax rates to pre-Bush administration levels. The tax changes in the bill, though, are retroactive.
The House has not yet scheduled a vote on the bill, and passage is not guaranteed because of fierce opposition from some lawmakers to the fact income taxes will increase for some Americans under the agreement. Those making more than $400,000 as individuals or $450,000 for joint filers would pay higher rates under the agreement.
The bill, HR 8, also delays by two months the across-the-board budget cuts due to take effect Jan. 2 under the sequestration procedures of the 2011 Budget Control Act. By delaying, but not preventing, sequestration, the agreement leaves the Defense Department at risk of being forced to cut $57 billion to $63 billion from the 2013 budget while also giving them less time, which means less flexibility, in making the cuts.
DoD previously had eight months to make a 9.4 percent reduction in all programs other than military personnel, which are exempt from 2013 cuts under waiver authority being used by President Obama. Delaying sequestration's target date to March 1 leaves the Pentagon threatened with the same cuts but with just six months to make them if sequestration were to occur.
For example, defense officials have been warning Congress that unpaid furloughs for the military's 800,000 civilian workers were among the options being considered. These furloughs would be more disruptive if they had to be accomplished in a shorter period of time.
Deferred maintenance and repairs to military facilities is another place where defense officials expect to save. Saving the same amount of money in less time is likely to force even tighter rules on what types of repairs are made. In the past, when base maintenance funds have been tight, the services have resort to deferring maintenance on family housing, even not repairing toilets in on-base housing if a unit has more than one bathroom.
Senate Majority Leader Harry Reid, D-Nev., said Jan. 1 that he wished an agreement could have been reached to resolve sequestration, the looming debt limit crisis and the mid-year extension of funding for federal agencies required by March 27 because the government is operating under a temporary appropriations bill as a result of the inability to agree on funding priorities. "I am disappointed we were not able to make the ‘grand bargain,' as we have tried to do for so long, but we tried," Reid said on the Senate floor.
"If we do nothing, the threat of a recession is very real," Reid said. "Passing this agreement does not mean negotiations halt. We can all agree there is more work to be done.
Sen. Mitch McConnell of Kentucky, the Senate GOP leader who negotiated details of the agreement in direct talks with Vice President Biden, said he also hoped Congress can do better. "It shouldn't have taken us this long to come to an agreement, and this shouldn't be the model for how we do things around here."