The Deal, The Mess, And a Look Ahead
President Barack Obama said his priority was keeping the current income tax rates in place for most Americans. The deal that passed Congress yesterday did just that. It raised taxes on people making more than $400,000 and pushed the fight over spending back to another day.
For Indian Country the deal is important for several reasons. First, it puts off the sequester until March. That will give agencies, tribes and individuals, time to prepare. The odds are that every federally-funded program will have to shrink and that federal employees will be looking at some kind of furlough in 2013.
The deal also keeps the Special Diabetes Program for Indians going at its current funding level. (I would argue that this program is important for all Americans because figuring out how to reduce diabetes is a critical part of the budget picture. Diabetes is the most expensive disease in America and its growth in the general population is an epidemic to be.) The deal also extends unemployment insurance. The bill also authorized the farm bill for another nine months. And did something about the cuts in payments to doctors under Medicare by delaying for a year automatic cuts, but getting hospitals to pick up part of the cost.
But for most people taxes did go up yesterday. Neither Democrats nor Republicans were keen on doing anything about the payroll tax, which had been set at 4.2 percent for the past two years, now will be 6.2 percent. So look for a smaller paycheck soon.
As I said: Most of the deal was about taxes. The other issues were saved for another day. But that day is coming fast. The United States has already passed its statutory limit on debt. The Treasury Secretary is moving accounts around to skirt the limit, but that won't last long. One day soon there will be "calculation" reported that the U.S. government has hit a ceiling.
The ideal would be for a clean bill that just raises the limit. That will not happen. It's now the Republican's best weapon and it will be used to try and cut more spending. (This is remarkable: No other nation argues about a spending limit after it already spent the money.)
So this one issue alone will again bring us to the brink. Republicans want more budget cuts than are in the sequester. What makes this impractical is that the focus remains on domestic programs and there is not a lot of money to be found there. If Republicans were unified, they would have a huge bargaining chip here. (Had the party been unified, they could have stopped the Senate deal, but the votes were not there. Already the Republican versus Republican debate is intense.)
The second coming fight will be when the continuing resolution -- the ad hoc budget -- expires at the end of March.
Both fights will be rough. And, here is the bad part for Indian Country, any compromises will mean even less money for programs. There is zero chance for more money, even for critical programs such as Indian health. As I have written before, the choice ahead is between severe austerity and austerity light.
Now a quick look at the future.
Ideally there would be a rational discourse, both in Washington and around the country, about our long-term budget challenges. We would figure out what works, what's fixable, and what has to change.
But that's not going to happen. The fights coming over the next couple of months will be nasty and largely about spending that is inconsequential (which really is all of domestic spending).
Unfortunately this deal, which probably had to happen, makes another cliff battle inevitable.