Volume XVIII No. 29:

73 days and counting. That’s the time left until the start of the 2014 fiscal year. October 1^st will also herald the expiration of the continuing resolution currently funding government operations and the end of sequestration – the across-the-board budget cuts mandated by the Budget Control Act of 2011 (BCA). But it certainly won’t mark the end of budget dysfunction in the Capitol.

In the heat of July, Congress typically tears through the next year’s twelve annual spending bills. Well, 292 days into fiscal year (FY) 2013, the House of Representatives has passed a grand total of three. And the Senate, well they haven’t found the time for even one.

Part of the reason for the slow march is that pretty much everyone is resigned that none of the bills will actually be enacted into law. Not just before the end of the fiscal year, but ever. Even the defense bill – normally a lock – is looking vulnerable. This predicament is largely an outcome of the yawning gap between how much and on what the House and the Senate want to spend in FY14.

It’s important to remember how we got here. In 2011, Congress passed the BCA which – in exchange for increasing the debt ceiling – required at least $1.2 trillion in deficit reduction over the next decade. If Congress (either through the “Super Committee” the BCA created or of their own will) didn’t come up with the reductions, across-the-board budget cuts (“sequestration”) would start in 2013 to eventually achieve the overall deficit reduction target. The BCA also set annual spending caps for the next eight years – caps that are lower than projected “baseline” (the formal estimate of annual spending levels for the next 10 years). If the caps are exceeded in any year, sequestration would cut them back down to size.

Now both chambers and the President have to dance around the capped spending levels that were set in the BCA. But they all have different moves. The House limbos under the cap, but cha-chas away from the mandated balance and cuts more from non-defense accounts. The President and the Senate both waltz past the caps with a variety of fancy footwork adjustments to revenue and spending policy. But to do the budget dance you need partners that are on the same page, and Congress is certainly not there. Everyone hates the BCA restrictions, but not enough to agree on what do about it.

Part of that is because the dire predictions of sequestration resulting in scores of furlough days, closed national parks, a hollowed out military, and a massive economic downturn. Meat inspectors and air traffic controllers were handed a get-out-of-sequestration free card, and the Pentagon also got some relief. Hours and entrances to some federal facilities were curtailed, but none were shuttered. This is not to say that sequestration hasn’t had some impact. Even a one day furlough means less cash in the paychecks of federal workers. There have been cuts to programs like Head Start that have affected families or made programs adjust their level of service.

But for all the ruckus raised about sequestration, the impacts – while real – have largely been mitigated and not felt across the economy. Heck, the Air Force is even allowing the Thunderbirds aerial stunt team to fly again. Furthermore, the across-the-board cuts end September 30. Yes, there are budget caps for defense and non-defense spending, but they are top line numbers. Congress, the President and the agencies can prioritize what to fund (and what to cut) under those caps.

The simple fact is we have been spending beyond our means for too long. The only way to fix that is to bring our spending in line with our revenue — spend less, increase our “means”, or most realistically both. But the first step is to get the budget process back on track and start agreeing on spending levels and setting priorities. Then we need to tackle comprehensive tax and entitlement reform. The alternative is to continue to let the Budget Control Act vote from a couple summers ago dictate our budget policy for the next decade.