Passing a Budget, Dealing With Debt Cap and Facing Down the Sequestration

Washington, DC, has produced enough distracting scandals and issues in the past couple of months that we have nearly forgotten about passing a budget, increasing the cap on the national debt and sequestration. I suspect that all of these intertwined issues are about to re-enter the spotlight.

July 1 is when many of the spending reductions required by sequestration went into effect. Some federal government agencies and departments are experiencing selective, short-term layoffs, while others are simply shutting down for a few days. These actions will affect about 800,000 federal employees. Beyond that, I doubt that many of us will be greatly affected this year. Bear in mind that the sequester is a 10-year program that requires deeper cuts each year, until Congress passes legislation to replace the sequester. While this initial year of cuts was across-the-board, future cuts will have to be enacted by Congress, likely entailing targeted reductions vs. the aforementioned across-the-board cuts. Therefore we can hold out hope that Congress will eliminate some of the many programs that fiscal conservatives often question. The Alaskan “bridge to nowhere” serves as an example.

The next likely date of fiscal importance is Sept. 30, when the federal government fiscal year ends. A budget should be passed that would become effective on Oct. 1. Don’t hold your breath, though, as years sometimes pass with no new budget. As a remedy, Congress passes continuing resolutions (CRs) that allow government to continue to operate at the level of the previous budget.

The third leg of this unstable stool is increasing the congressionally permitted level of national debt. You will recall that, earlier this year, Congress agreed to let the debt go through May 18, which has long since passed. The secretary of the U.S. Treasury has indicated that, with some unexpected money coming to the federal government from confiscated Fannie Mae and Freddie Mac profits, and his ability to manage (manipulate) the books, the United States might be able to make it to year-end before reaching the approved debt level.

As business managers, most of us would tackle these fiscal problems head-on and collectively, because they obviously intersect. However few people confuse business management with government management today. Government management will look at these three issues as separate and unique. Efforts will be made to deal with each issue. No one can predict their success, but recent history seems to indicate that the sequester will linger for a few years at best, an annual budget will be unattainable, and some compromise will surface on the debt ceiling.

Sadly, this will likely occur while the federal government continues to be more intrusive in the workings of business and in the daily lives of her people.

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