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5 Ways Obama Can Defuse a Fiscal Cliff Stalemate


These five steps are a mixed proposition for Obama -- they buy some additional time to reach a deal, but they also remove many of the economic pressures that would force a compromise.

Obama won re-election by promising to continue the existing rates for Americans earning less than $250,000 a year. House Speaker John Boehner, R-Ohio, began discussions by pushing to extend the current rates across-the-board for everyone, saying a tax increase would sideswipe economic growth.

But avoiding any increase through the use of withholding tables cannot last indefinitely, since the government would eventually have to increase the amounts collected. If Obama deploys this strategy, it would suggest his confidence that he's on the cusp of a deal with congressional leaders, Anderson said.

Spend Now, Cut Later

Congress approves agency budgets, but the White House often decides how to "apportion" money over the course of the year.

The White House Office of Management and Budget does not have to instantly demand that agencies meet the combined $109 billion worth of cuts to Defense and domestic programs next year. Obama could fund some agencies at their current levels, while planning for later cuts that-if a deal is reached-might never be needed.

An April GAO report on sequestration noted that the "execution and impact of any spending reductions will depend on legal interpretations and actions taken by OMB." But it's also a gray zone in the law. The Comptroller General ruled way back in 1957 that such an approach could not cause a "drastic curtailment" of expenditures at the end of the fiscal year.

The OMB also has a limited ability to parcel out funding, since the continuing resolution to finance the government runs through March 27.

"You would not see the same impact on all parts of the federal government," said Patrick Lester, director of federal fiscal policy for the budget transparency organization OMB Watch. "We could get through most of the month of January without most of the federal agencies being put in a terrible jam."

Agencies Have Multi-Year Funding

Many agencies receive multi-year funding that could be tapped if funding is squeezed, according to a recent analysis by OMB Watch. If those leftover balances are not obligated for any specific program, they can easily ensure a steady revenue stream since they're not subject to the $54 billion in sequestration cuts that are scheduled next year for non-Defense programs.

Agencies Can Shuffle Their Budgets

Federal agencies do not need congressional approval to shift money within their appropriations. By "reprogramming" their appropriations, agencies have the "substantial ability to redirect cuts away from sensitive areas of spending to other areas that may be less sensitive in the first few weeks of the year," the OMB Watch analysis noted.
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