President Barack Obama on January 2, 2013 signed the American Taxpayer Relief Act of 2012 after Senate passed the measure by 89-8 votes and House of Representatives passed by 257-167 votes that had averted the so-called fiscal cliff. Otherwise the nation would have faced another bout of possible recession due to $600 billion in automatic tax hikes and spending cuts. However, the deal will buy time only for two months as negotiation now will shift to Debt ceiling front. The deal will let Bush-era tax cuts expire for the country's affluent: $400,000 annual earnings for individuals and $450,000 for families. The expiry of tax cuts for affluent will raise an estimated $620 billion over the next decade. The package includes:
* Extension of unemployment benefit for 2 million long-term unemployed
* Hike in top tax rate from 35% to 39.6%
* Increase in Capital Gains tax from 15% to 23.8% for top earners, with 3.8% to fund Affordable Care Act's implementation
* Expiry of 2% reduction in Social Security tax, instituted couple of years ago, for wage earners
* Hike in estate tax from the current rate of 35% to 40% for any inheritance over $5 million
On January 23, 2013, House Republicans passed a measure to lift the country's debt ceiling without calling for proportionate cuts which they had been demanding for so long. However, they were able to insert a punitive measure against their Senate colleagues that threatened to withhold their pay unless they passed a budget blueprint by April 15, 2013. Senate had not passed any budget since 2009. Now, comes the March 1, 2013 when automatic spending cuts, also called as sequestration, to the amount of $85 billion in Fiscal 2013 will kick in.
On February 14, 2013, Senate Democrats proposed their $110 billion plan to avoid $85 billion automatic spending cuts, also known as sequester, for fiscal 2013 that would begin on March 1, 2013. Under the 10-year $110 billion plan, $55 billion will be raised from new revenue and $55 billion from spending cuts.
New Revenue Component ($55 billion)
* New tax revenue of $54 billion by requiring those with adjusted gross incomes above $2 million to pay an effective tax rate of 30 percent.
* Raising $1 billion in additional revenue by ending two tax breaks: (I) one for certain oil companies, and (II) another for companies that send jobs overseas.
Spending Cuts ($55 billion)
* $27.5 billion in defense
* $27.5 billion in direct payments to farmers
On March 1, 2013, the day sequestration, or automatic spending cuts, kicked in, President Barack Obama met with the Congressional leaders from both parties to make a last ditch attempt at finding some solution to deep cuts in defense and domestic programs. However, the meeting produced no tangible results amid the recent administration warning of impending longer lines at airports, pay cuts for Border Patrol agents and Pentagon's 900,000 civil employees. Now the battle line is being moved forward to March 27, 2013, when the government may be forced to shut down unless Congress passes a funding measure. The sequestration seems destined to be order of the day for months to come as the White House and the Congressional Republicans are locked in the fiscal tug-of-war as $85 billion in spending cuts are taking effect this fiscal year (Fiscal 2013) and $1.2 trillion over the next decade. Congressional Budget Office has estimated how the projected deficit will grow with and without sequestration.
Year: 2013; Deficit (with sequestration):$846 b; Projected deficit (w/o sequestration): $42 b
Year: 2014; Deficit (with sequestration):$616 b; Projected deficit (w/o sequestration): $89 b
Year: 2015; Deficit (with sequestration):$430 b; Projected deficit (w/o sequestration): $99 b
Year: 2016; Deficit (with sequestration):$476 b; Projected deficit (w/o sequestration): $103 b
Year: 2017; Deficit (with sequestration):$535 b; Projected deficit (w/o sequestration): $104 b
Year: 2018; Deficit (with sequestration):$605 b; Projected deficit (w/o sequestration): $105 b
Year: 2019; Deficit (with sequestration):$710 b; Projected deficit (w/o sequestration): $104 b
Year: 2020; Deficit (with sequestration):$798 b; Projected deficit (w/o sequestration): $104 b
Year: 2021; Deficit (with sequestration):$854 b; Projected deficit (w/o sequestration): $104 b
The sequestration is part of the big picture that is playing out in efforts to reduce deficits over the next decade. The deficit reduction effort started with Budget Control Act in August 2011, and aims at reducing deficits over the next decade (2014-2023) by $3.9 trillion. The breakdown of $3.9 trillion (in deficit reduction) is as follows (***):
* Budget Appropriations (2011 Fiscal Year): $635 billion
* Budget Control Act caps (August 2011): $910 billion
* Fiscal Cliff deal (January 2013): $720 billion
* Sequestration (March 2013): $995 billion
* Interest savings: $660 billion
*** Totals reflect 10-year savings from 2014 through 2023. They don't include savings from 2011 through 2013 that has resulted from the above measures.
The above breakdown includes some stark figures as the deficit reduction will be achieved 66% by spending cuts, 18% by new revenue and 17% by interest savings.
The House of Representatives on March 21, 2013 passed a measure that would keep government running through this fiscal year (Fiscal 2013). The measure passed by 318-109 votes keeps funding level at the current level that has been enacted after the sequester has been kicked in on March 1, 2013. It underfunds key components of Obamacare. The House also approved a separate budget resolution on March 21, 2013 that aimed at reducing the debt over the next decade, and that measure was approved by 221-207 votes. The resolution is the third try of Budget Committee Chairman Paul Ryan to introduce his signature plan such as voucherizing the Medicare and transforming the Medicaid as state block grants.
GLANCE AT RYAN PLAN INTRODUCED MARCH 21, 2013 VS. SENATE DEMOCRATS' PLAN
(10-YEAR OUTLOOK)
* TOTAL SPENDING: $41.7 trillion (H); $46.5 trillion (Senate Democrats)
* Total Revenue: $40.2 trillion (House); $41.2 (SD)
* 10-year Deficit: $1.4 trillion (H); $5.4 trillion (SD)
* National Debt at the end of 2023: $20.3 trillion (H); $24.4 trillion (SD)
On March 23, 2013, Senate passed its budget plan for the first time in four years that contrasted sharply from a rival plan approved by the House two days ago. The vote was 50-49, and the blueprint includes a spending plan of $3.7 trillion for Fiscal 2014 that calls for tax increases, cuts spending modestly and addresses the debt problem marginally.
President Barack Obama on March 26, 2013 signed the stopgap spending bill to continue funding through September 30, 2013 at the rate that would preserve most of cuts that took hold effective March 1, 2013.
As part of sequestration that had kicked in March 1, 2013, Federal Aviation Administration (FAA) starting on April 21, 2013 began to implement rotating furloughs of air traffic controllers across nation's airports, creating flight logjam and delays. As the frustration started to build up over the week, the US Senate on April 25, 2013 passed a measure that would partly undo the damage inflicted by the so-called sequestration. The measure will allow FAA to shift $253 million from the airport improvement fund to the one that directly impacts nation's air traffic control system. House on April 26, 2013 approved the Senate-passed measure by 361-41 vote.
* Extension of unemployment benefit for 2 million long-term unemployed
* Hike in top tax rate from 35% to 39.6%
* Increase in Capital Gains tax from 15% to 23.8% for top earners, with 3.8% to fund Affordable Care Act's implementation
* Expiry of 2% reduction in Social Security tax, instituted couple of years ago, for wage earners
* Hike in estate tax from the current rate of 35% to 40% for any inheritance over $5 million
On January 23, 2013, House Republicans passed a measure to lift the country's debt ceiling without calling for proportionate cuts which they had been demanding for so long. However, they were able to insert a punitive measure against their Senate colleagues that threatened to withhold their pay unless they passed a budget blueprint by April 15, 2013. Senate had not passed any budget since 2009. Now, comes the March 1, 2013 when automatic spending cuts, also called as sequestration, to the amount of $85 billion in Fiscal 2013 will kick in.
On February 14, 2013, Senate Democrats proposed their $110 billion plan to avoid $85 billion automatic spending cuts, also known as sequester, for fiscal 2013 that would begin on March 1, 2013. Under the 10-year $110 billion plan, $55 billion will be raised from new revenue and $55 billion from spending cuts.
New Revenue Component ($55 billion)
* New tax revenue of $54 billion by requiring those with adjusted gross incomes above $2 million to pay an effective tax rate of 30 percent.
* Raising $1 billion in additional revenue by ending two tax breaks: (I) one for certain oil companies, and (II) another for companies that send jobs overseas.
Spending Cuts ($55 billion)
* $27.5 billion in defense
* $27.5 billion in direct payments to farmers
On March 1, 2013, the day sequestration, or automatic spending cuts, kicked in, President Barack Obama met with the Congressional leaders from both parties to make a last ditch attempt at finding some solution to deep cuts in defense and domestic programs. However, the meeting produced no tangible results amid the recent administration warning of impending longer lines at airports, pay cuts for Border Patrol agents and Pentagon's 900,000 civil employees. Now the battle line is being moved forward to March 27, 2013, when the government may be forced to shut down unless Congress passes a funding measure. The sequestration seems destined to be order of the day for months to come as the White House and the Congressional Republicans are locked in the fiscal tug-of-war as $85 billion in spending cuts are taking effect this fiscal year (Fiscal 2013) and $1.2 trillion over the next decade. Congressional Budget Office has estimated how the projected deficit will grow with and without sequestration.
Year: 2013; Deficit (with sequestration):$846 b; Projected deficit (w/o sequestration): $42 b
Year: 2014; Deficit (with sequestration):$616 b; Projected deficit (w/o sequestration): $89 b
Year: 2015; Deficit (with sequestration):$430 b; Projected deficit (w/o sequestration): $99 b
Year: 2016; Deficit (with sequestration):$476 b; Projected deficit (w/o sequestration): $103 b
Year: 2017; Deficit (with sequestration):$535 b; Projected deficit (w/o sequestration): $104 b
Year: 2018; Deficit (with sequestration):$605 b; Projected deficit (w/o sequestration): $105 b
Year: 2019; Deficit (with sequestration):$710 b; Projected deficit (w/o sequestration): $104 b
Year: 2020; Deficit (with sequestration):$798 b; Projected deficit (w/o sequestration): $104 b
Year: 2021; Deficit (with sequestration):$854 b; Projected deficit (w/o sequestration): $104 b
The sequestration is part of the big picture that is playing out in efforts to reduce deficits over the next decade. The deficit reduction effort started with Budget Control Act in August 2011, and aims at reducing deficits over the next decade (2014-2023) by $3.9 trillion. The breakdown of $3.9 trillion (in deficit reduction) is as follows (***):
* Budget Appropriations (2011 Fiscal Year): $635 billion
* Budget Control Act caps (August 2011): $910 billion
* Fiscal Cliff deal (January 2013): $720 billion
* Sequestration (March 2013): $995 billion
* Interest savings: $660 billion
*** Totals reflect 10-year savings from 2014 through 2023. They don't include savings from 2011 through 2013 that has resulted from the above measures.
The above breakdown includes some stark figures as the deficit reduction will be achieved 66% by spending cuts, 18% by new revenue and 17% by interest savings.
The House of Representatives on March 21, 2013 passed a measure that would keep government running through this fiscal year (Fiscal 2013). The measure passed by 318-109 votes keeps funding level at the current level that has been enacted after the sequester has been kicked in on March 1, 2013. It underfunds key components of Obamacare. The House also approved a separate budget resolution on March 21, 2013 that aimed at reducing the debt over the next decade, and that measure was approved by 221-207 votes. The resolution is the third try of Budget Committee Chairman Paul Ryan to introduce his signature plan such as voucherizing the Medicare and transforming the Medicaid as state block grants.
GLANCE AT RYAN PLAN INTRODUCED MARCH 21, 2013 VS. SENATE DEMOCRATS' PLAN
(10-YEAR OUTLOOK)
* TOTAL SPENDING: $41.7 trillion (H); $46.5 trillion (Senate Democrats)
* Total Revenue: $40.2 trillion (House); $41.2 (SD)
* 10-year Deficit: $1.4 trillion (H); $5.4 trillion (SD)
* National Debt at the end of 2023: $20.3 trillion (H); $24.4 trillion (SD)
On March 23, 2013, Senate passed its budget plan for the first time in four years that contrasted sharply from a rival plan approved by the House two days ago. The vote was 50-49, and the blueprint includes a spending plan of $3.7 trillion for Fiscal 2014 that calls for tax increases, cuts spending modestly and addresses the debt problem marginally.
President Barack Obama on March 26, 2013 signed the stopgap spending bill to continue funding through September 30, 2013 at the rate that would preserve most of cuts that took hold effective March 1, 2013.
As part of sequestration that had kicked in March 1, 2013, Federal Aviation Administration (FAA) starting on April 21, 2013 began to implement rotating furloughs of air traffic controllers across nation's airports, creating flight logjam and delays. As the frustration started to build up over the week, the US Senate on April 25, 2013 passed a measure that would partly undo the damage inflicted by the so-called sequestration. The measure will allow FAA to shift $253 million from the airport improvement fund to the one that directly impacts nation's air traffic control system. House on April 26, 2013 approved the Senate-passed measure by 361-41 vote.
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