D.C. Watch: Fiscal cliff threat to dominate lame-duck session

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In just a few more weeks, the election will be over and Congress will return to Washington to try to tackle some pretty important issues. Billions of dollars of tax cuts expire at the end of this year, raising taxes on essentially everyone if Congress does not take action.

Automatic (sequester) spending cuts reducing government spending by about $109 billion for 2013 kick in on January 1. Most economists say this combination, called the fiscal cliff, would send the U.S. economy back into recession. However, a broad compromise on these issues that Congress has been unable to deal with for the last two years in the scheduled 16 day lame-duck session will be very difficult. The outcome will probably depend on the results of the election. A shift in control of either chamber of Congress or in the White House could cause stalemate as the gaining party tries to push these issues into the new session of Congress.

The threat of the fiscal cliff is expected to dominate the lame-duck session of Congress crowding out other issues, like the farm bill. While the provisions of the Senate passed bill and the version approved by the House Agriculture Committee are generally accepted by the farm sector, there are very diverse views about the food and nutrition program provisions.

House Majority Leader Eric Cantor, who controls the House schedule, says the farm bill will have to be changed before it can be approved and with the very short time frame scheduled for the lameduck session, it would be nearly impossible to get a bill approved in the House, have a House-Senate Conference Committee work out differences, and then get the House and Senate to re-vote on the final version. It looks like the passage of the farm bill will be pushed off into the next session of Congress and the final package may look a lot different from what is currently being discussed.

The expiration of the farm bill is having a very limited impact on most of the farm sector, but the loss of the Milk Income Loss Contract (MILC) payments will start hurting dairy producers. Most other key program provisions continue at least through the end of the year, but the MILC payments producers got in October will be the last ones until Congress takes some action. According to a California newspaper, the number of dairies in the state has fallen by almost 10 percent already this year.

A WTO arbitrator has been appointed to determine a deadline for the U.S. to comply with the WTO ruling that the U.S. Country of Origin Labeling (COOL) is unfair to meat imports from Canada and Mexico. The WTO made the ruling on June 29 and negotiations between the U.S., Canada, and Mexico have been unable to agree on when changes to the program must be made. The WTO guidelines say that the “reasonable period” of time to implement a WTO ruling should not exceed 15 months. That suggests the COOL program may continue unchanged through the middle of next year.

Trade distorting “amber box” subsidies totaled $4.12 billion in 2010, the U.S. reported to the World Trade Organization, continuing a downtrend that started in the mid-2000s. The total is well below the $7.6 billion cap the U.S. agreed to in earlier Doha round trade talks, which were never finished. The actual cap for the U.S. for “amber box” subsidies is $19.1 billion. Trade distorting subsidies would rise if the current Senate or House version of the farm bill goes into effect.

Officials now expect the U.S. government will reach the debt ceiling in January, not in December as previously forecast. The Treasury Department can probably delay hitting the ceiling for a month or so, but Congress will have to take action on this issue very early in the new session that begins in January.

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ff  |  October, 22, 2012 at 05:12 PM

And what decisions there can be? A year ago, when a debt ceiling was lifted, reduction of expenses from the 2013th was a main precondition. It can be cancelled now? But same there will be the real clownery. Besides, I don't think that not reduction of privileges will exclude falling of real gross domestic product (if to take away real inflation). Simply gross domestic product will fall together with dollar. There is a month to the next raising of a debt ceiling, and Chinese already say that will get rid from tresures.

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