Seemingly, not everyone is informed what will now happen after the super-committee failed to reach agreement on spending reductions.
Nothing, at first, since $1.2 trillion in across-the-board spending cuts and pursuant to the Budget Control Act of 2011, will only kick in starting 2013. This will allow Congress to do “horse trading” for a while, it might even result in the repeal of automatic spending cuts. Second, there is nothing in the law that says – a “specific” program or that “particular” program will see spending cuts. Thirdly, the President already said he “will veto” any automatic spending cuts, (which is contrary to the law) – he signed in August of this year.
Interestingly, by the time spending might be enacted, Obama will be riding into the sunset. What the Budget Control Act says is: “cuts in both defense and nondefense programs”. The non-specifics will surely result in across the isle budget fights – with lobbyist playing major money role. In a more general sense of the Budget Control Act of 2011, Congress approved military spending reduction from 10 percent in 2013 to 8.5 percent in 2021 or, roughly $10 billion/year based on our current $701 billion/ year defense spending. In nondefense programs, Congress limited spending from 7.8% percent in 2013 to 5.5 % in 2021, with most Medicare programs being reduced by 2 percent a year.
Mandatory cuts starting in 2013, will entail $10.8 billion/year in Medicare payments to providers and insurance plans, as well as $5.2 billion/year to other subsidized programs, such as farm price support. Mandatory programs exempt from any spending cuts are Social Security, Medicaid, Food Stamps, Supplemental Social Security, Earned Income Tax Credit, Veteran’s Benefits and Federal Retirement.
First things first, Congress has plenty on its plate, when returning from Thanksgiving recess. Congress must consider extending this year’s Social Security 2 percent payroll tax cut, approving extended unemployment benefits, adjusting the alternate minimum tax and tackle how doctors are paid for Medicare patient care. Each item will likely result in major disagreement on how to pay for it.
@MikeFriemann – on Twitter