Federal budget divide, debt crisis, continue

As the end of the federal fiscal year approached, Congress canceled its scheduled September recess to work on pressing fiscal matters – the federal budget and the nation’s debt ceiling – hoping to avert a government shutdown and decrease the odds of harming the economy.

With only 10 days remaining until the federal government was scheduled to run out of money, the House passed a continuing resolution to fund the federal government through Dec. 15 at a level equivalent to $986 billion annually. Continuing resolutions may be used to fund government when a budget has not been adopted; this mechanism has funded government operations over the last several years.

The continuing resolution passed by the House, however, contained a provision to defund the implementation of the Affordable Care Act, the comprehensive health care legislation known as Obamacare.

Using parliamentary procedures, the Senate was expected to separate the continuing resolution into two parts, decoupling the provision that would defund the Affordable Care Act from the remainder of the funding measure. The continuing resolution to fund government operations, if passed by the Senate, would then be returned to the House for another vote. The separate provision to defund the Affordable Care Act was expected to fail in the Senate, with Senate leaders announcing that they would not support the measure.

Leaders of the Republican-controlled House indicated that if the spending bill fails in the Senate, the House would craft individual spending bills department by department.

Without agreement on a funding measure prior to Sept. 30, the federal government would be forced to implement a partial shutdown. The last shutdown occurred in late 1995 and lasted 21 days.

As Congress considered spending measures to avert a government shutdown, the need to increase the nation’s debt ceiling also loomed. The nation is scheduled to reach its debt ceiling at some point in mid-October. Without an increase, the federal government would lack the authority to pay debts already incurred and would lose its authority to borrow money.

While incoming revenue in the form of taxes would allow some bills to be paid, it would not be enough to cover all bills. According to the Washington, D.C.-based Bipartisan Policy Center, about one-third of federal bills would go unpaid.

House leadership is seeking further spending cuts in exchange for an increase in the debt ceiling. President Barack Obama has said, however, that he will oppose the cuts if they are not paired with tax increases.

Economists agree that a failure to increase the debt ceiling will increase market instability and adversely affect the economy.

Also looming is the second year of sequestration, which is expected to continue at roughly the same levels as last year. This means that affected agencies and programs will continue to operate on smaller budgets than they had in recent years prior to fiscal 2013.

Federally funded programs implemented at the local level and subject to continued sequestration include the Community Development Block Grant program, competitive public safety grants, and water and wastewater funds.