Washington Notes: The Impact of 2012 Election on Tax and Budget Policy

With the looming December 31 expiration of the Bush tax cuts, the threat of sequestration, and the need to raise the debt ceiling in January, neither Democrats nor Republicans will want to face the consequences of inaction and/or no agreement. The nature of these issues and the convergence of interests and deadlines lead us to predict a deal that fully or substantially avoids sequestration, partially extends the Bush tax cuts, and raises the debt ceiling.