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And the sequestration clock is STILL ticking …

December 21, 2012

As of this post early on Friday evening, there is no deal yet on the fiscal cliff and sequestration and it is unclear whether there will be. With yesterday’s collapse of House action on Speaker Boehner’s interim strategy (apparently, he could not command sufficient Republican support), prospects appear gloomy on a deal. However, historically, these types of negotiations are often declared “dead” only to be revived and sometimes result in compromise legislation.

Negotiations may well continue right through the January 1 and January 2 deadlines for various laws to go into effect. In essence, if a deal is reached and is awaiting a vote, the President could order the Treasury Department and OMB not to implement the various elements of the fiscal cliff and sequestration pending final action. In particular, at some point a deal may be ready, and would have to wait until new Members of Congress are sworn in on January 3.

Meantime, as articulated by The National Journal, there are four basic scenarios to end the fiscal cliff debate: Grand Bargain, No Deal, Unhappy Compromise, and Kick the Can.

  • The “Grand Bargain” is what Obama and Boehner are working on: a package of $2 trillion plus in revenue enhancements and savings through changes in entitlement programs and cuts to discretionary programs.
  • “No Deal” is what we have been most fearful of. In this scenario, sequestration would go into effect on January 2, 2013 and FDA would lose between $320 million and $350 million from its FY 13 (current year) budget. Politico has a good analysis of the legal consequences of sequestration if no deal is agreed upon.
  • An “Unhappy Compromise” would involve some half-steps that would combine some changes intended to be permanent (that might reduce the deficit by $500 billion to $1 trillion) with some delays to buy time for further negotiations.
  • “Kick the Can” would be a lesser form of an unhappy compromise — perhaps $100 billion in deficit reduction to postpone the sequestration and allow tax rates to temporarily stay the same … but with the inevitable day of reckoning largely postponed from January 2 to another date certain with little or no agreement on anything else.

Within the four scenarios, there are an almost infinite number of variations. When we have a more definitive statement on whether/how the fiscal cliff and sequestration will be resolved … and the impact on FDA … the Alliance will make available a special report that will provide the details. Meantime, we wish everyone a relaxing holiday season and a happy and healthy new year.

Note: This analysis and commentary is written by Steven Grossman, the Deputy Executive Director of the Alliance for a Stronger FDA.

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