A Preview of the Potentially High-Stakes Fall

Lawmakers have dealt with several Fiscal Speed Bumps – budgetary deadlines – throughout the year, but quite a few will appear over the next few months, making for an eventful fall. CRFB's latest report, "The Gathering Storm: Fiscal Clouds Amass This Fall" details what policymakers have to address and the stakes associated with each remaining Speed Bump.

Click here to read the full report.

There are four big deadlines remaining for the rest of 2015:

  • The end of 2015 appropriations and return of sequestration (October 1)
  • The expiration of the highway bill and insolvency of the Highway Trust Fund (October 30)
  • The exhaustion of extraordinary measures to avoid raising the Debt Ceiling (mid-Fall)
  • The deadline to renew tax extenders retroactively (December 31)

First, lawmakers will have to enact new appropriations or a continuing resolution by October 1 to keep the government funded in FY 2016. However, the new fiscal year also means the return of the sequester that reduces both defense and nondefense discretionary spending, unsettling some policymakers in both parties. Congress will have to decide on funding levels and find a way to pay for any sequester relief they enact, and then enact appropriations.

Next, at the end of October, the latest highway authorization expires and the Highway Trust Fund runs low. Lawmakers will need to close a roughly $175 billion structural gap through 2025 to keep the trust fund solvent. If they do not act on either the authorization or the trust fund, the Department of Transportation would be unable to make new obligations and disbursements for current highway projects, which would then be limited to incoming revenue. CRFB released a plan earlier this year to deal with highway funding.

Third, the debt ceiling will prevent additional borrowing this fall unless action occurs. Since mid-March, the Treasury has resorted to "extraordinary measures" (which have become increasingly ordinary in the past several years). Treasury Secretary Jack Lew recently sent a letter to Congress explaning that extraordinary measures will continue through October, but may not last much beyond that. Regardless, lawmakers will have to raise the debt ceiling to avoid defaulting on our nation's obligations. The Better Budget Process Initiative has several ideas on how to reform the debt ceiling to better promote fiscal responsiblity while being less economically damaging.

Finally, there is the unofficial end-of-the-year deadline for retroactively reviving the tax extenders that expired at the end of 2014. This group of more than 50 temporary tax breaks was last extended retroactively for one year at a cost of $42 billion. A one-year extension this year would likely cost a similar amount, and a permanent extension would cost around $750 billion over ten years. Last year, our PREP Plan proposed revenue offsets to pay for a temporary two-year extension, while setting up a process for tax reform to decide their ultimate fate.

These four deadlines could have serious fiscal consequences, potentially adding $2.5 trillion more to the debt over ten years than what current law allows. However, they also represent opportunities to make the budget operate more smoothly and responsibly. Lawmakers should at the very least not add to the debt and should aim for lasting solutions that set the federal debt on a better path.

Click here to read the full report.