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October 16, 2012

Re: The 2011 Federal Budget Control Act (Debt Ceiling Deal),
Expiring Tax Cuts and the Fiscal Cliff
NLC Webinar Scheduled for October 30

Dear Mayor:

As you may recall, in the Summer of 2011, as our Nation approached its debt limits, the Obama Administration and Congress reached agreement on a plan that allowed the government to continue to operate, and that would significantly reduce the Federal deficit over the next 10 years. The legislation aimed at an “up-or-down” vote (No Amendments would be accepted.) on a bill to cut the deficit by at least $1.5 trillion over the next 10 years, which would be passed by December 23, 2011.

Under the terms of that compromise, the debt limit was increased by $400 billion. The President could request a further increase of $500 billion, subject to a congressional motion of disapproval which the President may veto, in which case a two-thirds majority in Congress would be needed to override the veto. Further, the President could request a final increase of $1.2–1.5 trillion, subject to the same disapproval procedure. The exact amount depended on Congressional approval of cuts recommended by a “Supercommittee”, and whether Congress had voted on a Balanced Budget Amendment to the Constitution, by the end of 2011.

Spending was to be reduced more than the increase in the debt limit. No tax increases or other forms of increases in revenue above current law were included in the bill. The bill directly specified $917 billion of cuts over 10 years in exchange the initial debt limit increase of $900 billion. $21 billion of this will be applied in the FY 2012 Budget. Additionally, the agreement established a Joint Select Committee on Deficit Reduction, often called the “Supercommittee.” That bi-partisan Committee was supposed to produce deficit reduction legislation by November 23, 2011, that would be immune from amendments or filibuster. In November of that year, however, the Committee disbanded due to the inability to agree on a plan.

The agreement called for mandatory cuts (sequestrations), beginning in 2013, if Congress failed to enact a 10 year $1.2 trillion deficit deduction bill. There are to be exceptions for military employee pay, and Social Security, Veterans’ and Medicaid benefits. Medicare benefit reductions would be limited to 2%. But other than that, and absent further Congressional action, the mandatory cuts will apply to both mandatory and discretionary spending.

At the same time, and again, absent further Congressional action, several previously enacted tax cuts are scheduled to expire. The combination of higher taxes and reduced Federal spending would push the U.S. over, what has been referred to as, the “fiscal cliff.” While the deficit would be drastically reduced, economic activity would be significantly slowed. Conversely, extensions of the tax cuts and relaxation of the sequestration requirements would balloon the Federal deficit and increase the national debt.

National League of Cities (NLC) President Ted Ellis, Director of Federal Relations Carolyn Coleman, and Program Director Mike Wallace will present a free webinar discussing the sequestration process and how local leaders from across the country can join together to urge Congress to find a bipartisan and balanced solution to reducing the deficit.

The webinar, “Sequestration: What Local Officials Need to Know, Say and Do,” is scheduled for Tuesday, October 30, 2012, from 2:00 to 3:00 P.M. (EDT).  Additional information and registration to the webinar can be accessed at: http://www.nlc.org/build-skills-and-networks/education-and-training/event-calendar/sequestration-what-local-officials-need-to-know-say-and-do

If you have any questions, contact Jon Moran at jmoran@njslom.com or 609-695-3481, ext. 121.

Very truly yours,


William G. Dressel, Jr.
Executive Director

 

 

 

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