L/SFR Sneak Peek-Fiscal Challenges Ahead: Debt Ceiling and Another Round of Budget Talks

April 19, 2011 | By Liza Casabona | Post a Comment

(This article was excerpted from the April 25 issue of Local/State Funding Report.) With the fiscal year 2011 budget behind them, the president and Congress must now turn their attention to other, possibly more rancorous fiscal issues like raising the debt ceiling and passing a budget for FY 2012.

The debt limit debate is likely to be the next big negotiation in Washington, D.C. Congressional leaders and the administration have begun staking out positions in advance of an anticipated May start for talks on raising the federal debt limit to keep the U.S. from defaulting on its spending obligations.

Debt limit votes are frequently used by political leaders as leverage in spending deals, and given the highly contentious nature of all spending-related negotiations recently, this year is unlikely to be any different.

Administration officials and congressional leaders have been referencing the debt limit since the beginning of the year, but the start of official talks will kick the rhetoric into high gear over the next few weeks.

In a move interpreted as an effort to get out in front of the debate over U.S. debt, President Obama outlined a framework for addressing some of the long-term fiscal challenges facing the nation in an April 13 speech at George Washington University. The speech detailed the president’s vision for addressing looming fiscal challenges.

The debate over FY 2012 and the debt ceiling has largely been cast as a showdown between Obama’s vision and that of House Budget Committee Chairman Paul Ryan, R-Wis., who outlined a Republican vision on spending in the FY 2012 budget he unveiled prior to the president’s speech.

Obama’s proposals included everything from rescinding the Bush-era tax cuts to help boost tax revenues, a proposal he has pushed before, to implementing a “debt fail-safe” that would automatically trigger across-the-board spending cuts if the U.S. debt-to-gross domestic product ratio is not stable and declining by 2014. In his speech, the president called for a gradual deficit reduction of $4 trillion over the next 12 years, enforced by the debt fail-safe.

Stay tuned for other “Sneak Peeks” into upcoming stories from the Local/State Funding Report. Subscribers: check your next issue for more analysis of President Obama’s fiscal policy speech.

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