The budget and the deficit continue to dominate discussions in Washington, D.C. Although this week did not see any significant progress in addressing either the budget or the deficit, it didn't lack for news on the respective fronts.
On Monday, the U.S. officially reached its $14.3 trillion debt limit and began taking "extraordinary measures" to meet its current obligations. It is projected that these measures will allow the Treasury Department the ability to continue borrowing money until August 2. At that point, according to the Treasury, "the borrowing authority of the United States will be exhausted," which could result in a government default on its obligations.
Congress must vote before August 2 to increase the debt ceiling to avoid such a default. Republicans continue to demand significant spending cuts be a part of any debt-ceiling vote. It is likely the vote will have that spending-cut element but unlikely it will include any tax or Medicare reform. The Associated General Contractors (AGC) and a number of other trade associations sent a letter to House and Senate leaders urging them to take action on the debt limit.
Also this week, the future of the bipartisan group of Senators known as the Gang of Six, who had been working on a significant deficit reduction deal modeled after recommendations of President Obama's Deficit Reduction Commission, was called into question as Senator Tom Coburn (R-OK) withdrew from the negotiations. The Gang of Six had been discussing tax and entitlement reform paired with spending cuts and caps on mandatory and discretionary spending. AGC had learned that the Gang of Six were likely to address our nation's infrastructure gap, but not recommend increasing the gas tax, as the President's Deficit Commission suggested.
The path forward on the deficit and the budget remains unclear. AGC anticipates additional cuts in spending as part of the debt-limit debate and the budget and appropriations process for fiscal year 2012.