WHAT THE PROPOSAL TO INCREASE THE DEBT CEILING MEANS FOR CONTRACTORS
The House Republican proposal to relieve the debt ceiling issue should be seen as a place to start negotiations and not much more. While specific provisions in the plan would trim both civilian and defense spending this year, contractors should not get overly excited about the prospects of at least the defense cuts coming to fruition. “We’re not going to cut defense. I just promise you that,” said Oklahoma Senator Tom Cole (R-OK). In addition, the 10-year caps on discretionary spending that are also part of the proposal likely won’t survive in any final agreement. Even if they did, history shows that what is capped by one Congress can easily be uncapped by the next. Contractors, and others watching the debt ceiling debate, can best view the current proposal as the opening move in a chess match. The outcome of the match, and exactly when it may end, are still far from certain. It is also important to note that there has been recent speculation that the strength of tax returns may move the deadline by which an agreement is necessary up or back, depending on how sizeable they are. Republicans hold a slim majority in the House and will likely need every vote to pass a debt ceiling package. Even that move, which is by no means certain, only provides additional bargaining leverage with senators and administration officials. Contractors should definitely pay attention to this process in order to anticipate disruptions in business this year and the impact of any deal on potential future spending but take care not to get too excited about these early moves. We haven’t even made it to the half-time show, let alone the two-minute warning.