Congress returns for the first week of the Lame Duck session, following an exciting week with the elections and the surprise resignation of CIA Director General David Petraeus. This week House and Senate leaders are organizing not only their strategies moving forward with the Administration regarding the “fiscal cliff” but are electing leadership for their respective caucuses, beginning to chose new Committee Chairs and holding the “office lottery” as more Senior members move up to better real estate and Freshmen Members pick offices.
While leadership elections and hunts for office space are happening in the House and Senate – the debate will begin on the “fiscal cliff” encompassing sequestration, expiring tax credits and automatic tax increases that are scheduled to go into effect at the end of the year and beginning of 2013. Negotiations are already underway regarding the $607 billion in tax increases, tax cuts and policies set to expire on December 31, 2012 including the Bush tax cuts, and the payroll-tax holiday. While both House Speaker John Boehner (R-OH) and U.S. Senate Republican Leader Mitch McConnell (R-KY) have stated they do not support tax increases and will instead focus on closing tax loopholes, lowering rates and fixing entitlement programs, Speaker Boehner suggested that everything including potential revenue increases are on the table for negotiation. President Obama throughout the campaign and after his election has unequivocally stated he supports extending tax cuts for the middle-class and has laid the marker with Congress that he will veto any legislation extending tax cuts for families making more than $250,000.
For Washington State University there are several small education tax benefits that are set to expire, including the American Opportunity Tax credit which will prompt the reinstatement of the lesser value HOPE tax credit for college tuition. These are non-controversial; however, we will keep an eye on their fate throughout the debate.
In addition to the debate on the tax credits, Congress and the President must come to an agreement on the budget or “sequestration,” a series of automatic spending cuts authorized by the Budget Control Act, impacting Defense and domestic programs will go into effect on January 2, 2013. Thus far, Congress has been unable to reach a bipartisan debt reduction deal triggering the Budget Control Act requiring automatic spending cuts to commence that will amount to $1.2 trillion deficit reduction for 10 years effective January 1, 2013. The clock is ticking for Congress and the Administration to reach an agreement – which could end up being an extension of time to reach an agreement. For Washington State University this could mean a significant cut to federal defense research funding and a $39 million cut to NIFA, in addition to an overall 8% cut including education.
Finally, in the middle of this debate, an issue that is important to WSU and Eastern Washington – reauthorization of the Farm Bill is still up in the air as the House let the bill expire by not acting before they adjourned for the election. Both House Speaker John Boehner (R-OH) and House Majority Leader Eric Cantor (R- VA) indicated that the House would deal with the Farm Bill after the election, despite concerns over vote counts supporting the bill. There are some arguing that taking action by the end of the year, before or if, sequestration goes into effect will protect Agriculture programs from additional cuts in that scenario because they will already be subject to agreed upon cuts outlined in the House and Senate Farm Bills. The Senate cuts $23 billion and the House version that passed the House Agriculture Committee included $35 billion – we anticipate that the final number will be somewhere in between.
Needless to say, there are a lot of items that we are tracking and we will continue to keep you updated on the evolving landscape and what it means for WSU.