Fiscal Cliff II: It’s Baaaaaaack

Actually, the fiscal cliff never left. If you thought we solved the fiscal cliff with the deal back in January (or even the more recent debt ceiling deal), you’re mistaken. Washington left a bunch of issues unresolved, and actually made a couple of them worse. And it’s up to Congress to find some answers.


A major unresolved issue is sequestration – the automatic across-the-board spending cuts that were set to take effect on Jan. 2 – which the fiscal cliff deal simply delayed until March 1. And it looks increasingly like Congress will let sequestration go into effect, despite President Obama’s pleas last week that they do something, even if it’s just short-term.

Federal Budget

Also unresolved is a budget for the current fiscal year, which is more than four months underway because the federal fiscal year begins on Oct. 1. (Yes, the fact that we have no budget is as outrageous as it sounds.) Since Oct. 1 the government has been operating on a stop-gap funding bill – known as a continuing resolution – which is set to expire on March 27.

Since we have no budget for the current year, the White House Office of Management and Budget (OMB) says that the president’s budget request for FY2014 – which by law is supposed to be released no later than the first Monday in February – will be delayed at least until March. OMB’s reason for the delay is that without a budget in place for FY2013 they don’t have a baseline set of numbers on which to build the new request.

Entitlement Reform

Another issue left unaddressed is the future of the major entitlement programs – Social Security, Medicare and Medicaid. Entitlements, also known as earned benefits, are programs that pay benefits to anyone who applies and meets the eligibility requirements. Social Security and Medicare – the two largest entitlement programs – together account for roughly one third of total federal spending. Containing the costs of these programs is a top priority for Republicans in Congress, and is sure to be part of budget debates in the coming weeks and months.

Debt Ceiling

The recent debt ceiling deal – also known as the “No Budget, No Pay Act” – requires both the House and Senate to pass a budget resolution by April 15. If either chamber fails to do so, then members' salaries will be withheld. This should pose no problems for the House, but the Senate has not passed a budget resolution in the four years. New Senate Budget Committee Chair Patty Murray (D-WA) has, however, stated that she will push a budget resolution this spring.

Finally, the debt ceiling deal didn’t actually increase the debt ceiling. Instead, it suspended it until May 18. So Congress and the White House will have to go through the process all over again to deal with the debt ceiling and prevent the government from defaulting on its debt payments.

For up-to-the-minute information on the status of budget debates and tips for taking action, check out our Fiscal Cliff II resource page and our Federal Budget Timeline.