Year ahead: Tax fight, trigger cuts loom large

By Peter Schroeder - 12/19/11 02:50 PM ET

As Congress draws a contentious close to 2011, even more fights over the nation’s fiscal issues loom for 2012 as both parties gear up for a bruising campaign season.

The largest issue on the horizon will be the fate of the Bush-era tax cuts. Slated to expire at the end of 2012, the fight over whether to extend them, or what should be included in any effort to do so, is expected to be a top issue in the second session of the 112th Congress.

Another issue that must be dealt with in the new year will be whether the $1.2 trillion in “trigger” cuts will survive to take effect in 2013. Those cuts — a combination of across-the-board cuts to defense spending and discretionary spending, which could include some cuts to Medicare providers — are currently set to occur because of the failure of Congress’s deficit-reduction supercommittee. But members on both sides of the aisle have criticized the automatic cuts as harmful, and will be spending 2012 looking for ways to either replace or repeal them.

While the Dodd-Frank financial reform law will be more than a year old as we enter 2012, it still will be a prime partisan battleground, with Democrats looking to defend the sweeping overhaul from Republican efforts to chip it apart. So far, legislation to repeal parts of the law — or the whole thing outright — have been introduced in the House, but gained little traction. But Republicans have had a bit more success in denying agencies charged with implementing the law the heftier budgets requested by the White House. That tug-of-war will continue in next year’s appropriations fights.

In a related arena, the fate of the Consumer Financial Protection Bureau remains an open question heading into the new year. Senate Republicans are demanding changes to the new agency, and have blocked President Obama’s nominee to head the bureau until they get them. But so far, the president and congressional Democrats have shown little interest in compromise, setting up a standoff.

On trade, Congress will be expected to vote on the controversial acceptance of Russia to the World Trade Organization early in the year, and could see a Trans-Pacific Partnership trade agreement come together later on.