At the thirteenth hour, Congress was able to pass and the President signed into law H.R. 8, the American Taxpayer Relief Act of 2012, avoiding a “fiscal cliff” in this new year. (Please see previous DD post). In this agreement, tax cuts were extended for all individuals making less than $400,000 and married couples making less than $450,000. It also delays sequestration until March 1, 2013, which would enact an automatic 8.2 percent cut to all discretionary spending–including many federal library programs. H.R. 8 also makes the following revisions to sequestration:
- Reduces the total amount of sequestration by $24 billion, reducing the total from $1.2 trillion to $1.176 trillion.
- Pays for the $24 billion reduction by 50 percent through spending cuts and 50 percent increased revenues. It reduces the discretionary spending caps by $12 billion for FY 2013 and raises revenues from a provision concerning Roth IRAs by $12 billion.
- The $12 billion in discretionary cuts is achieved by cutting defense spending by $6 billion and nondefense discretionary (NDD), which includes federal library programs, spending by $6 billion.
- Thus, the actual percentage cut for NDD on March 1 (which the Office of Budget Management had projected at 8.2 percent) will be smaller. However, since that cut will be from only seven months of spending left in the fiscal year instead of nine months, proportionately it will have about the same real impact.
While H.R. 8 puts off the pain of sequestration for two months, we still do not know what will happen if sequestration goes into effect on March 1.