I wrote about the potential impacts of the then-looming fiscal cliff a few weeks ago. At the last minute—actually, about a day after the last minute—Congress and President Obama awoke from their torpor and passed legislation, which what’s left of our media immediately hailed as “preventing the nation from going off the fiscal cliff.”
Well, not quite.
Lost in the fiscal cliff hubbub was the fact the fiscal cliff was actually a two-step fall. The first step downward—massive tax increases on almost all Americans—was indeed averted. The second part of the Cliff, sequestration, however, wasn’t addressed.
Rather, it was kicked down the road by about two months. As I pointed out in my earlier post, sequestration will impact the wonderful world of grants much more than tax increases. The former means significant reductions in discretionary grant funding, while the latter means more “money for nothing and chicks for free.”
Over the next few weeks, the battle lines over sequestration will form as the new Fiscal Cliff takes shape. This, too this will be a two-step Fiscal Cliff. Step one is our old pal sequestration, while the second part will be raising the federal debt ceiling. While the two steps are not inherently intertwined, the timing virtually ensures that the debates over both will be.
If you’re with a nonprofit that’s drifted back into somnolence because the Fiscal Cliff has been averted, shake yourself awake because the roller coaster is about to start again. In many ways,* coming to agreement on the largely non-raising of taxes was fairly easy for Congress and President Obama to agree on, compared to the coming battles over sequestration and raising the debt limit.
While understanding the byzantine politics of these two issues is above my pay grade, the eventual outcomes will likely include either decreases in federal spending on discretionary grant programs or, at a minimum, a reduction in the rate of increase. Either course will have significant impacts for grant seekers.
* Free proposal lead-in phrase in here.