The deficit-reduction package consuming Washington will still dominate the policy agenda long after Congress returns from its August recess. Given the complexity of the legislation and the size of cuts needed to achieve its targets, the likely long-term impact on public policy will be that funding will drive the conversation and decision-making for the next decade like never before.
From now until December, policymakers will be focused on identifying $1.5 trillion in further deficit reductions over the next decade. If Congress can't agree on a spending plan, $1.2 trillion in automatic, across-the-board spending cuts will be triggered.
Either way, the result will be dramatic cutbacks in defense and non-defense spending. Many key programs will be cut and that will impact small businesses, global corporations, and individuals.
Deficit reduction is but one of many economic challenges for the US. Policymakers must continue to seek solutions to a struggling economic recovery, continuing high unemployment, a spreading global debt crisis, and a rating downgrade by S&P that could impact the savings and retirement plans of millions of Americans.
There is little confidence across America that Congress can resolve these issues. Partisanship is at an all-time high and the next election is just 15 months away.
There is broad consensus that these issues can and must be resolved. Confidence in our markets and our government must be restored and more jobs must be created. Finding solutions will not be easy, especially in an era of sizeable government-spending cuts. Solutions will require compromise and cooperation, but also innovative thinking from policymakers and business and financial leaders working together.
In the months and years ahead, it will not be business as usual on the Hill. The deficit-reduction package has changed that. A new normal will eventually emerge.
Business leaders can help shape that new normal with constructive, bipartisan dialogue initially centered on the need for a broad economic policy and a pro-growth, job-creating legislative agenda that will restore confidence in the economy, spur business investment, and begin to put more Americans back to work.
The challenge is daunting in light of the painful spending cuts coming up over the next decade. The alternative, however, is a policy agenda that remains driven largely by further deficit reductions and continued uncertainty.
The opportunity is for leadership and at present it is not coming from government.
Debra Cabral is an EVP at Porter Novelli in Washington.