Lame Duck, Taxmaggedon, Sequestration and Credit Unions

Hon. Daniel A. Mica, Principal, The DMA Groupby: Hon. Daniel A. Mica, Principal, The DMA Group

“Lame Duck”, “Taxmaggedon”, “Sequestration”, these terms have been thrown about casually for the entire year. What might happen because of them will impact every single American and possibly most people around the world.

First, the over-simplified version:  Today your credit union has terminated 10% of its Board and its senior management team (or some may have retired).  You hire new replacements but the law dictates that for the next 60 days your Board and senior management can meet every day and make major decisions that impact the credit union for years to come.  The new team you just hired is not allowed to participate but all those who were terminated or retired participate in making the decisions …that is a lame duck session.

Second, suppose at midnight tonight, because of the inaction of others, all of your taxes, income taxes, payroll taxes (and 60 other taxes), increase instantly by 10% … that’s “taxmaggedon.”

And finally, at midnight tonight, a mandate says that all of your spending is automatically reduced by 10% and you can only pay 90% of your commitments to those you owe, i.e. your mortgage, car and other loans, credit cards not to mention employees or vendors.  That’s the simplified version of sequestration.

In reality, the examples are exaggerated but the impact is understated.

Congress will return after election in a lame duck session and all 535 members will make decisions that impact our future.  However, it is projected that at least 10% will not be returning to the next Congress because of retirements, defeats or election to another office.  It does indeed become a wildcard session and no one knows what the outcome will be.  What we do know is they desperately need to increase revenues (taxes) or cut spending or both.

The reference to “taxmaggedon” generally refers to at least a half dozen major tax items set to expire without Congressional action and if they do expire, there will be a sizeable increase in taxes Americans pay.  Among them are the Bush tax cuts, including the 15% capital gains and dividend rate rising to 20%, the alternative minimum tax patch and over 60 temporary tax breaks.  The dollars at stake amount to trillions.  This could be one of the biggest instant tax changes in our lifetime.

Sequestration: In an attempt to force discipline on themselves, the last Congress passed legislation that requires automatic across-the-board cuts in government spending in what is termed a “meat ax” approach.  The thought was that this would be so drastic Congress would take a reasoned approach and adjust the budget thoughtfully.  For example, programs that are less necessary and clearly overfunded might get a 20% cut, while clearly underfunded program and services with a strong need might get a lesser cut.  These across the board cuts apply to all but a few exceptions including Medicare, Medicaid and Social Security.  The across-the-board approach hits everyone, regardless of the importance in our nation’s financial, business and social structure. Neither party wants to see this happen.

Whichever way the decisions are made, this year’s lame duck session is more than likely set to make history. The 2010 lame duck period that accomplished only four key pieces of legislation: the repeal of the “Don’t Ask, Don’t Tell” policy, the food safety bill, the 9/11 First Responders Bill and the START ratification, was hailed as the most productive lame duck session since WWII. In comparison to the laundry list of legislative issues facing the 2012 post-election session, the 2010 season will probably no longer hold that historic title and will rather be remembered for the session that pro-longed the battle of the Bush tax cuts.

With a multitude of moving parts and Election Day scenarios, I cannot predict what this Congress will accomplish but I have a strong feeling it will be anything but “lame” if they tackle all of the issues at hand.

Dan Mica, former head of the Credit Union National Association (CUNA), established The DMA Group as a means to combine a myriad of experience into a one-stop consultancy.  Elected in 1978 to represent Florida’s 11th district in the U.S. House of Representatives, Dan Mica served five terms before beginning what would become more than two decades of work in the world of non-profits and association management.  

The DMA Group is a full-service consulting firm, providing the highest level of integrity and service through established practices and decades of experience.  www.dmagroupdc.com

Daniel Mica

Daniel Mica

Dan Mica, former head of the Credit Union National Association (CUNA), established The DMA Group as a means to combine a myriad of experience into a one-stop consultancy. Elected in ... Web: www.dmagroupdc.com Details