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Congressional deal would delay across-the-board budget cuts

Deal to Delay Across-the-Board Cuts
January 1, 2013

WASHINGTON — For higher education programs and federal research funding threatened by deep, automatic spending cuts, the last-minute deal reached in Congress and endorsed by the White House on Monday night to avert the “fiscal cliff” would give lawmakers two months to figure out how to cut the federal budget.

Congressional leaders and the White House agreed to put off by two months the sequester — the 8.2 percent cuts to many domestic discretionary programs, including federal research funds and some college access programs, that take effect as the new year begins. The postponement is part of a deal to avert for all but the wealthiest Americans on tax hikes that also would have taken effect as the Bush-era tax cuts expire.

The Senate voted 89-8 to pass the compromise plan. The House of Representatives still must do so and a vote could come as early as today. The ability of the plan to gather bipartisan support in the Senate left many predicting that the House would go along, but that is not a sure thing.

Merely postponing the spending cuts — which were scheduled to take place in the absence of a long-term deficit deal in the agreement to raise the debt ceiling in August 2011 — means that many questions remain unanswered.

"We're glad the sequester will at least be postponed, but it needs to be repealed entirely and we hope that will be accomplished in the next two months," Barry Toiv, vice president for public affairs at the American Association of Universities, wrote in an e-mail to Inside Higher Ed. The AAU is among the groups representing research universities that have been speaking out about the damaging impact that a sequester could have on American science.

The deal on taxes would increase tax rates from 35 percent to 39.6 percent for individuals earning at least $400,000 and couples earning at least $450,000. Those increases reflect a pledge by President Obama (even if adjusted during negotiations) that new revenue had to be part of the equation for solving budget problems, in part so that deep cuts to vital spending programs could be minimized.

The tax compromise also would extend the American Opportunity Tax Credit, a partially refundable tax credit for college tuition scheduled to expire at the end of the year. And while colleges had feared changes to charitable deductions in an agreement to avert the spending cuts and tax hikes, the final deal reportedly does not eliminate the deduction.

The Pell Grant was protected from the automatic spending cuts this year, but many other programs important to higher education are not, including the Supplemental Educational Opportunity Grant, federal work-study and federal funding for scientific and medical research. 

Putting off the automatic cuts for two months, a move that reportedly would be offset by unspecified spending cuts in other areas of the budget, means that Congress will need to reach an agreement by March 1 to raise billions in new revenue and cut billions from defense and domestic programs. 

That deadline will arrive at roughly the same time as another vote to increase the federal borrowing limit, and when a temporary law funding the federal government expires. In previous agreements to avoid a government shutdown, or a default on the federal debt, in the past two years, higher education programs — particularly the Pell Grant and subsidized student loans — have come in for spending cuts.

 

 

 

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