Debt Ceiling Extension Paves Way for Budget and Alternative to Sequestration

The House of Representatives passed a bill on January 23^rd enabling the federal government to keep borrowing money until May 18^th. Senate leaders as well as the White House indicated they would pass the measure. This bill includes a provision withholding pay for Congressional members unless a budget is passed by April 15th. The bill essentially rearranges the order of the three upcoming confrontations over the nation’s debt ceiling limit, sequestration, and the end of the current continuing resolution.

Despite the lack of a substantive remedy to the chronic debt problem, the delay does come with a silver lining. Previously, the debt ceiling debate roughly coincided with the March 1^st deadline for sequestration, which allowed Congress little time to craft compromises necessary to avoid triggering sequestration as it currently stands and prevent the nation from plunging into default.

While cuts to government programs remain a virtual certainty, Congress now has more breathing room to replace the meat axe approach of sequestration with a more sensible and judicious formula for enacting spending cuts.

The No-budget, No pay provision makes it more likely Congress will pass an omnibus spending bill this year. Congress has not passed a traditional budget as it is intended since 2009. No new programs can start under continuing resolutions, so a budget would be highly beneficial. In addition, a budget, even if it comes with additional spending cuts, helps eliminate uncertainty allowing you to better position your business.

– Lloyd McCoy Jr., Senior Analyst