• Fiscal cliff deal – what does it mean?

    CWT Savvy Traveler
    Today we’re excited to welcome guest blogger Matt Beatty, President, Military & Government Markets at CWTSatoTravel, with an overview of the issues surrounding the U.S. “fiscal cliff” and what we’ll be watching for over the coming weeks and months.

    beatty_mattHappy New Year! Instead of watching the Orange Bowl on Tuesday night, I’m sure you all were watching C-SPAN like me to see the outcome of the House vote on the fiscal deal. (Sad but true.)

    As you likely know, a fiscal cliff deal was approved Tuesday night in the House and has since been signed by President Obama. With all of the news out there, I thought it would be relevant to share what this means for CWT and CWTSatoTravel’s business as well as our clients.

    In the next two months we will be following three big items that are crucial for our business and economy as a whole—sequestration, the debt ceiling and a continuing budget resolution.

    First, as it relates to the sequestration, while the legislation avoided the automatic cuts scheduled to go into effect yesterday, Congress merely “kicked the can down the road” 60 days. What happens if a new spending deal isn’t reached by March 1?  The automatic cuts (sequestration) will then go into effect on March 27, cutting Federal spend by nearly 10% across the board.

    However, that is not the only looming ‘cliff’. The other two ‘cliffs’ are the debt ceiling and a continuing budget resolution—both very problematic. Apparently, the debt ceiling is projected to be reached about the same time as the new sequestration deadline (March 1).  Congress will have to act by March to adjust the debt ceiling. What happens if we hit up against the debt ceiling? There are varying opinions as to what would happen if we hit the ceiling—none of which are good scenarios. As we saw in mid-2011, it created chaos in the global markets and led to the downgrade of the U.S. Government debt rating.

    As it relates to the continuing resolution (CR), Congress has only approved agencies’ funding (a pseudo budget if you will) for the first six months of fiscal 2013 (October 2012 – March 2013). Congress will need to act to approve funding for the remainder of fiscal 2013, prior to March 27. What happens if no CR (or firm budget) is reached by then?  The government could be subject to a “shutdown.”

    Finally, we also must remember that all of this will need to be decided under the new Congress which is being sworn in today.

    So…while Tuesday’s news is good in the short term, the next 60-90 days will be extremely critical. Of course, we’ll continue to watch the situation as a whole, and also the specific impact to travel. Since both the Federal Aviation Administration (FAA) and the Transportation Security Administration (TSA) are government agencies that could be impacted by spending cuts, we’ll be keeping a close eye on any developments in those areas that could impact travelers and the travel process. More to come!

    Happy New Year!


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