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Posted by on Oct 31, 2012

Nation Faces Sequestration

The presidential election is a week away, and the winning candidate will immediately face a dire economic situation known as “The Fiscal Cliff.” This term applies to numerous budgetary factors all occurring simultaneously at the end of this calendar year. These factors include sequestration, the expiration of the 2001 and 2003 tax breaks, and the expansion of the Alternative Minimum Tax (AMT).

Sequestration may have the most significant short-term impact on federal grant recipients and subrecipients. The Budget Control Act of 2011 requires $500 billion in reductions to discretionary, non-security spending achieved through an 8.2% across-the-board spending cut. The required spending cuts will be automatic unless the president and Congress act to prevent sequestration by the end of this year.

Currently, a bipartisan coalition of eight senators is working behind the scenes to reach a compromise. Many observers and policy experts do not expect any compromise to emerge until after the election. If sequestration does occur, the level of funding for competitive federal grants is likely to be reduced significantly.

Management Concepts will continue to monitor the budgetary process and update the Grants Blog when major developments occur.

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