Gearing up for Gridlock

Blog Post
Wednesday, November 11, 2020

As an eager nation waits for state officials to certify results of the 2020 elections, Congress and the president (both this year’s and next) face a crowded agenda filled with urgent policy deadlines. While some political strategists predict continued gridlock, a number of action-forcing events will require the two branches of government to cooperate or risk economic calamity. 

Lawmakers don’t have much time to come together. The first tranche of deadlines arrives in December:

  • FY 2021 appropriations (December 11). The federal government is currently operating under the terms of a continuing resolution that expires at midnight on December 11. Congress and the president have two options: pass an omnibus appropriations bill containing all 12 outstanding appropriations measures for FY 2021 or agree to another temporary continuing resolution. If Congress and the president fail to act by the deadline, government funding will expire, and non-essential services will be suspended.

  • Medicare and Medicaid extenders (December 11). The existing continuing resolution temporarily extended several Medicare and Medicaid demonstration projects and provider reimbursement policies. These provisions expire along with government funding at midnight on December 11. 

  • Temporary Assistance for Needy Families reauthorization (December 11). TANF provides cash assistance to low-income families with children via block grants to states. In addition to cash payments, states use their TANF funds for work and training programs, childcare, prekindergarten programs, programs to provide services to abused children and other programs. The CARES Act of 2020, which provided emergency coronavirus relief aid, temporarily reauthorized TANF through November 30 and the FY 2021 continuing resolution extended that deadline to December 11.

  • CARES Act relief provisions (December 31). Although CARES Act pandemic unemployment benefits ended in July, there are a few provisions that expire at the end of the calendar year. Among these are: the deferral of employer payroll taxes; unemployment benefits for workers not traditionally eligible for unemployment (the self-employed, independent contractors, gig economy workers, etc.); temporary tax benefits to help improve business cash flow during the pandemic; and the temporary suspension of aviation excise taxes. As the coronavirus pandemic engulfs all 50 states, lawmakers should want to extend these emergency measures beyond December 31. 

  • Tax Extenders (December 31). Every year there are a small number of industry-specific tax provisions that will expire, or have just expired, that affect certain core constituencies within Congress. Lumped together under the umbrella term “tax extenders,” they include provisions affecting both individuals and businesses. This year, there are a number of provisions that would be politically perilous not to extend in the middle of a global health pandemic, including the 7.5 percent threshold on the household medical expense deduction, the employer paid family leave credit, and the reduced excise tax on craft beverages. 

Looking ahead to 2021:

  • Debt limit suspension period ends (July 31). The amount of debt issued by the U.S. Department of Treasury is capped by law. To avoid the politically unpopular vote of raising the debt limit, for several years lawmakers have taken a more nuanced approach: suspending the debt limit for a specified period of time and then letting it reset at the level of debt that exists at the end of the suspension period (and then repeating the process anew). The current debt limit suspension period, which was enacted as part of legislation increasing the discretionary spending caps in 2019, expires at midnight on July 31, 2021, and on August 1, the statutory debt limit will be reinstated at the level of debt outstanding. After that date, the Treasury Secretary can deploy temporary measures to avoid breaching the limit, but the government’s current “burn rate” in the era of trillion-dollar annual budget deficits may not provide much wiggle room, meaning Congress and the president will have to act expeditiously to avoid defaulting on our debt.

  • National Flood Insurance Program reauthorization expires (September 30). The National Flood Insurance Program (NFIP) is the primary source of flood insurance coverage for residential properties in the United States. Over 22,000 communities in 56 states and jurisdictions participate in the NFIP, with more than 5 million policies providing over $1.3 trillion in coverage. The NFIP is funded from premiums, fees, and surcharges paid by NFIP policyholders; direct annual appropriations for specific costs of the NFIP; and borrowing from the Treasury when the balance of the National Flood Insurance Fund is insufficient to pay the NFIP’s insurance claims. NFIP authorization expires at midnight on September 30, 2021. If Congress fails to reauthorize the program, the authority to provide new flood insurance contracts will expire, and the authority for NFIP to borrow funds from the Treasury will be reduced from $30.4 billion to $1 billion. 

  • Surface transportation programs expire (September 30). The 2015 surface transportation act, Fixing America’s Surface Transportation Act (P.L. 114-94), was originally set to expire this year, but language in the current continuing resolution reauthorized the highway programs through September 30, 2021. If these programs are not extended or replaced before they expire, most federally funded highway personnel will be furloughed.

  • Anticipated exhaustion of federal Highway Trust Fund (approximately October 2021). The Highway Trust Fund comprises two accounts: the highway account, which funds the construction of highways and highway safety programs, and the transit account, which funds mass transit programs. Revenues credited to the Highway Trust Fund are derived primarily from excise taxes on gasoline and other motor fuels. According to projections by the Congressional Budget Office, spending authorized by extension of the FAST Act will exceed revenues deposited in the Highway Trust Fund by the end of the next fiscal year. Once exhausted, its spending would then be limited to no more than it collected in receipts. In 2022, the first year after the fund’s projected exhaustion, CBO projects HTF spending would be 25 percent below the amounts in the baseline projections.

  • Tax extenders (December 31). As in December 2020, another round of tax extenders will expire at the end of calendar year 2021.

Even if Democrats succeed in winning the two run-off Senate seats in Georgia in January 2021, thus providing President Biden with a unified government, compromise on these action-forcing events will be necessary to defeat the Senate’s legislative filibuster. Lawmakers better get to work NOW.