What Will the Budget Deal Do?

The budget deal reached by the White House and congressional leaders will prevent a government shutdown, avoid sequestration for two more years, and suspend the debt ceiling. But it isn't the model of fiscal responsibility. It has too many gimmicks and too few reforms. Read our statement.


Once the gimmicks are discounted and interest added, only half of the bill is paid for. Read more.


In case the deal fails to get enacted, our Q & A provides everything you should know about a government shutdown. Learn more.

The statutory debt ceiling needs to be addressed soon. Learn all about it.

Our Sequester Offset Solutions (SOS) Plan offers $300 billion of sequester relief that is fully offset.

Read the plan.


And Rep. Scott Rigell (R-VA) introduced legislation to permanently replace most of sequestration. Learn more.


Inaction and postponed deadlines have created a Gathering Storm where Congress and the President must address four remaining Fiscal Speed Bumps before the end of the year.

Learn more.


To maintain important infrastructure investments and avoid adding an additional $175 billion to the debt, Congress must identify responsible solutions to close the shortfall in the Highway Trust Fund.

CRFB’s plan, The Road to Sustainable Highway Spending, would encourage the passage of tax reform while also ensuring the Highway Trust Fund remains adequately funded regardless of tax reform’s fate. The plan would:

  1. Get the Trust Fund Up to Speed ($25 billion) by paying the “legacy costs” of pre-2015 obligations with savings elsewhere in the budget.
  2. Bridge the Financing Gap ($150 billion) with a default policy to raise the gas tax by 9 cents after a year and limit annual spending to income.
  3. Create a Fast Lane to Tax Reform to help Congress identify alternative financing before the gas tax increase and spending limits take effect.

Read the plan.


The Fiscal Cliff Resource Page

The United States faced a serious dilemma at the end of 2012 as a combination of steep tax increases and spending cuts were scheduled to occur all at once, known as the "fiscal cliff." A last-minute agreement was reached that diminished the impact of the fiscal cliff.

However, because policymakers have been unable to comprehensively deal with our fiscal challenges, a series of "Fiscal Speed Bumps" consistently arise and are often simply kicked down the road as Washington seeks to buy time instead of invest in solutions. A number of these deadlines converged into a "Gathering Storm" that threatened a new fiscal cliff at the end of 2015. A deal was reached in October 2015 that avoided some of these issues. 


Fiscal Cliff Refresher

The original fiscal cliff referred to the major budget changes that were initially set to occur all at once at the end of 2012 and beginning of 2013. These changes included the expiration of the 2001/2003/2010 tax cuts, the triggering of across-the-board spending cuts through the "sequester," the expiration of the payroll tax holiday, the end of the "patch" protecting many middle-class families from the Alternative Minimum Tax, and the end of the "doc fix" preventing steep reductions in Medicare payments to physicians. As Ben Bernanke remarked at the end of February 2012:

Under current law, on January 1, 2013, there's going to be a massive fiscal cliff of large spending cuts and tax increases. I hope that Congress will look at that and figure out ways to achieve the same long-run fiscal improvement without having it all happen at one date.

The fiscal cliff was minimized and the spending reductions under sequestration were eventually moderated for a couple of years because lawmakers found themselves between a rock and a hard place. While these changes would produce significant deficit reduction, they would do so in an abrupt and careless manner that would impair the fragile economic recovery. On the other hand, an even worse option would be to extend all of the policies with no corresponding offsets, leading to a mountain of debt and all of the associated economic risks.


The Gathering Storm

The inability to enact a comprehensive fiscal plan that puts the debt on a clear downward path as a share of the economy in a smart way has resulted in a series of mini cliffs that constantly re-emerge. Several of these Fiscal Speed Bumps are converging at the end of 2015.


Funding for federal operations must be resolved by the beginning of the new fiscal year on October 1 in order to avoid a government shutdown. Lawmakers must approve an appropriations package for the year or a short-term stopgap measure. One of the key sticking points is how to deal with sequestration.

The sequester, or sequestration, refers to the annual spending caps that were a part of the fiscal cliff. The sequester for 2014 and 2015 was replaced by the Bipartisan Budget Act of 2013, also known as Ryan-Murray. It is set to return on October 1 and lawmakers are feeling pressure to replace it once again with a bipartisan plan that is more sensible.

The sequester has been referred to as an ax where a scalpel is needed because the cuts will be abrupt and mindless. Many want to replace it with a more thoughtful and comprehensive approach that is phased in over time and deals with all parts of the budget.


Highway Funding

The legislation currently authorizing funding for surface transportation projects expires at the end of October. If highway spending is continued at current levels without additional revenue, the Highway Trust Fund will run out of money next summer.


Debt Ceiling

The "extraordinary meaures" being used by the Treasury Department to prevent a breach of the statutory debt ceiling are expected to be exhausted after the end of October. At that point, the debt limit will have to be raised or suspended to avoid a potentially disastrous government default, and it should be done in a timely manner because waiting until the 11th hour could have negative economic consequences. Reforms to the debt ceiling should also be considered that promote fiscal responsibility without generating much economic risk.


Tax Extenders

At the end of last year, over 50 temporary “tax extenders” expired. These include individual and business tax breaks for research and experimentation, wind energy, state and local sales tax, and many others. Most are renewed regularly and can be reinstated retroactively through the end of 2015. This can be used as an opportunity for comprehensive, pro-growth tax reform that simplifies the tax code, reduces tax rates and deficits, broadens the tax base, promotes growth, and makes thoughtful choices about how to address each tax extender.



Gathering Storm Resources


Appropriations/Sequestration Resources


Archive of Approopriations/Sequestration Resources


Highway Funding Resources


Debt Ceiling Resources



Archive of CRFB Fiscal Cliff Policy Papers and Statements


Op-Eds and Articles on the Fiscal Cliff


Fiscal Cliff Videos


Fiscal Cliff Infographics


Fiscal Cliff Interactive and Social Media