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Debt Crisis Averted: But What’s Next?


10/17/13

Working to reach consensus before the October 17th debt ceiling deadline, the U.S. Congress reached an agreement late last night to avoid a historic, and potentially catastrophic, lapse in the government’s ability to borrow money. The agreement averted an unprecedented debt default and will enable the government to re-open many of its services after a two-week shutdown.

Last night’s agreement funds federal government agencies until January 15, 2014 and extends U.S. borrowing authority until February 7, 2014 although the Treasury Department may be able to temporarily extend its borrowing ability beyond that date should Congress fail to act early next year. While the agreement is good news, the deal reached by Congress is only a temporary solution to the nation’s debt ceiling challenges. The potential for another showdown in Congress, and shutdown of the government’s borrowing power, looms in a few short months when this temporary agreement expires.

Because last night’s agreement was only a stop-gap measure, Americans are faced with two real prospects for early next year: another government shutdown on January 15, 2014 and another debt ceiling crisis on February 7, 2014. Moreover, some Capitol Hill insiders believe that, unless Congress aligns on a final, “once and for all” solution to the debt-ceiling crisis, we could be facing many more Congressional showdowns and deadlines — perhaps on a monthly basis and through the next election.


What Does CohnReznick Think?
According to Bob Moss, CohnReznick Principal and National Director of Governmental Affairs, “Yesterday’s break in the stalemate over funding the federal government and raising the debt ceiling includes a budget conference agreement that is on a very short timeline. Most lawmakers are not sure what the budget conference is expected to achieve, but there is certain to be debate on entitlements and sequester levels. As I mentioned in last week’s Capitol Connection, tax reform is still in the mix, but Ways and Means Committee Members will have to convince the balance of the House to cast votes on cutting popular breaks while at the same time debating cuts to some very popular spending programs like Medicare. Look for the tax reform process to return to regular order if the budget conference is not successful. While there may still be a ‘kick the can’ mentality all the way through Mid-Term elections, the pit stops along the way may not be as contentious now that Speaker Boehner has shown willingness to break with the ‘Hastert’ rule (the rule pertaining to only bringing a vote to the floor that has a party majority).”


For more information, please contact your CohnReznick client service professional or visit www.cohnreznick.com.


Circular 230 Notice: In compliance with U.S. Treasury Regulations, the information included herein (or in any attachment) is not intended or written to be used, and it cannot be used, by any taxpayer for the purpose of i) avoiding penalties the IRS and others may impose on the taxpayer or ii) promoting, marketing, or recommending to another party any tax related matters.

This has been prepared for information purposes and general guidance only and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and CohnReznick LLP, its members, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.

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