In August 2011, Congress passed the Budget Control Act which sought to put a framework in place for reaching a high-level agreement on overall federal spending and deficit reduction. The Budget Control Act (BCA) raised the debt ceiling; set caps on discretionary spending for FY12 and FY13 at levels almost $1 trillion lower than FY10; and established the Joint Select Committee on Deficit Reduction. Known as the Super Committee, it was tasked with recommending at least $1.2 trillion in reductions from federal spending by November 23, 2011 which would have to be passed into law by December 23, 2011.
The Super Committee did not reach agreement on a plan to recommend to the full Congress. This has triggered cuts in federal spending, known as sequestration, which are set to begin in the second quarter of FY13, or January 2013. Unless Congress makes a change in the law, all of these cuts will be taken from the discretionary portion of the budget which includes the justice assistance programs. At the same time, Members of Congress need to extend or amend the Bush-era tax cuts, raise the ceiling on the debt again, extend or amend the Alternative Minimum Tax, and extend or amend the Medicare payment rate for physicians. Together these and other items are referred to as the “fiscal cliff” because if left unaddressed experts believe they could push the economy back into recession.
Currently in a lame duck session, congressional leaders and White House officials are discussing ways for avoiding the fiscal cliff through a combination of spending cuts in discretionary and entitlement spending and tax reform. In the meantime, the FY13 appropriations bills did not pass Congress before the start of the fiscal year on October 1, 2012. Federal agencies and programs are operating on a Continuing Resolution (at roughly FY12 funding levels) through March 27, 2012.