Nation Avoids Fiscal Cliff, But Sequester that Could Harm Natives Still on Table

Rob Capriccioso
January 11, 2013


It was the New Year’s circus watched round the world: Congress and the White House going back and forth on a compromise in the waning hours of 2012 to prevent the United States from falling off a self-imposed “fiscal cliff” rife with tax hikes and deep spending cuts that the same Congress and White House had enacted just two years ago via the now infamous Budget Control Act.

In the end, a last-minute deal was struck by Vice President Joe Biden and Senate Minority Leader Mitch McConnell after intense talks (some filled with curse words, according to widespread press reports) broke down between President Barack Obama, Senate Majority Leader Harry Reid, and Speaker of the House John Boehner.

The Biden-McConnell deal prevented tax hikes on individuals making less than $400,000 and on couples making less than $450,000, and it saw Republicans agree to higher taxes on the rich for the first time in many years. It also included specific Indian country provisions, including allowing Alaska Native settlement trusts to tax income to the trust, not the beneficiaries; an Indian employment tax credit; accelerated depreciation for business properties on Indian reservations; and credits for the production of Indian coal.

At the same time, the deal fell far short of the “grand bargain” that Obama and many Congress members wanted, which would have encompassed agreements on spending cuts, entitlements, the debt ceiling, and taxes. Instead, Congress punted issues beyond taxes two months down the road to March when the current debt ceiling limit expires. Republicans hope to use that expiration and Obama’s desire to get it re-upped as a negotiation tool to achieve increased federal spending cuts. Obama, meanwhile, has said he will not compromise on increasing the nation’s debt ceiling, as that could harm the economy by preventing America’s government from paying its bills. He has said he is willing to negotiate on spending cuts, but no one knows how far he is willing to go. In his previous talks with Boehner, a change in Social Security benefits was considered by the president, but Democrats widely oppose any changes to that entitlement program. Obama also knows that Republicans are willing to negotiate on where the cuts will occur, since under the postponed Budget Control Act, defense spending would be drastically reduced, and most Republicans are against that happening.

Before the Biden-McConnell deal was struck, many Native Americans expressed concern that spending cuts should not include funding for federal Indian programs, such as those for the Bureau of Indian Affairs and the Indian Health Service. Because the deal only postponed cuts that could drastically reduce these programs, the same concerns remain. The Native American Contractors Association also made the case in December that Native American small businesses would be harmed via federal cuts: “For American Indian, Alaska Native and Native Hawaiian communities, the impact of the fiscal cliff will devastate the progress we have made to promote small business ownership under Native 8 (a) contracts,” said NACA Executive Director Kevin Allis.

In explaining why Indian programs should be protected, the National Congress of American Indians (NCAI) has attempted to educate the federal government on federal trust responsibility toward tribes and what it means even in a time of austerity: “The federal trust obligation to Indian tribes must be honored and vital tribal programs must be sustained in any deal to reduce the national deficit,” NCAI leaders wrote in a letter to congressional leaders and the president in November. “The obligations to tribal citizens funded in the federal budget are the result of treaties negotiated and agreements made between Indian tribes and the U.S. in exchange for land and resources, known as the trust responsibility.

“At the heart of the budget debate is the role and size of government. However, the authority to fund programs that fulfill the trust responsibility is founded in the Constitution, specifically the Indian Commerce Clause, the Treaty Clause and the Property Clause. This historic duty should not be sacrificed in any of the budget options or ultimate solutions. Congress must enact a plan to reduce the deficit through a balanced approach that includes new revenues and does not only rely on domestic spending cuts.”

While NCAI made the case that America’s deficit problem should be corrected through new revenue, or increased taxes, the deal struck by Biden and McConnell on taxes does not garner enough income to drastically reduce the deficits, according to federal estimates. That means spending cuts of some sort are still going to be seriously considered by federal leaders. How hard they will hit Indian country is still unknown.

The good news is that there is more time for tribes and Indians to make their case: “The reality is that the deal which the president and the Senate worked out, and backed the House into accepting, not only staved off disastrous cuts to Indian country programs, but it now gives tribes a fighting chance to build a unified platform and mount the strongest defense of those programs in the next Congress,” said Chris Stearns, Navajo lawyer with Hobbs Straus Dean & Walker and former Democratic counsel to the House Committee on Natural Resources. “We’re not out of the woods yet, but our position is a heck of a lot better.”

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