After months of negotiations, Congress and President Obama agreed to increase the Nation's borrowing limit, narrowly avoiding a catastrophic default on our debt. As with any compromise, there is both good news and bad news for seniors in this agreement.
The Good News:
Debt Ceiling: President Obama was given the authority to raise the debt limit, preventing a default or any disruption in sending out Social Security and veterans' benefit checks. The new limit should provide enough borrowing room to get through all of 2012 without further Congressional action, thus protecting Social Security and Medicare from being taken hostage again by a debt limit deadline during the middle of a very political election year.
Medicare & Medicaid: As a result of the effective advocacy by the National Committee and other seniors' groups, Social Security and low-income programs such as Medicaid are exempt from cuts either in the initial package of spending cuts or in the potential automatic cuts that could come later in the process. Medicare is exempt from the initial package of cuts, and is limited to no more than 2% in cuts to provider reimbursements in the second round of cuts.
Spending Cuts: The agreement includes $1 trillion in spending cuts that result from the establishment of 10 year caps on spending. This will result in about $10 billion in cuts to discretionary programs over the first two years of the plan (Fiscal years 2012 and 2013), split evenly between domestic and security programs.
The Bad News:
The New 'Super Committee': The plan creates a new Joint Committee of 12 Members of Congress, divided evenly between the House and Senate and each political party. This :"Super Committee" will have until November 23, 2011 to produce a plan reducing the deficit by at least $1.2-$1.5 trillion. It only takes 7 out of the 12 Members to approve any plan - which will then be 'fast-tracked' through Congress by the end of this year with limited debate, a simple majority to pass and no amendments allowed . No programs are protected from the reach of this Super Committee, and numerous Members of Congress have made it clear they expect most of the deficit reduction to come from 'entitlement reform' - which is code for cuts in Social Security, Medicare and Medicaid .
More Domestic Spending Cuts: As a way of putting pressure on Congress to approve the Super Committee's proposal, the agreement includes a 'penalty' for inaction. The penalty takes the form of a second round of automatic spending cuts to discretionary programs (which include, for example, Older American's Act programs such as Meals-on-Wheels, Senior Centers and transportation) up to a total of $1.2 trillion over the next decade. This second round of cuts is also intended to be split evenly between domestic and security programs, and exempts Social Security, and low-income programs such as Medicaid. Medicare cuts are limited to 2% in lower provider reimbursements - Medicare benefits that go directly to seniors are protected.
Revenues: Raising revenue is not included in the first round of cuts, nor is it included in the automatic cuts that would result if the Super Committee is not successful in producing a deficit reduction plan that is signed into law. Although increased revenue could be part of the Super Committee's recommendations, Republican Congressional Leaders have made it clear they only intend to appoint Members to the Super Committee who oppose tax increases, even to close tax loopholes or to require the extremely wealthy to contribute to deficit reduction. If they are successful in imposing this limit, just as they were successful in keeping revenue out of any of the spending cuts in the debt limit plan, all of our Nation's deficit reduction will come at the expense of the poor and middle-income Americans. Social Security, Medicare and Medicaid will see deep cuts, not just for future beneficiaries but also for today's seniors.
What Happens Next?
- The initial round of spending cuts will be enacted through the regular appropriations process for Fiscal Year 2012 (which begins on October 1st , 2011).
- Congressional Leaders will appoint a 12-member, bipartisan Joint Select Committee on Deficit Reduction (the so-called "Super Committee"). Its mission will be to create a package by November 23rd which reduces the deficit by at least $1.2 trillion over the next decade. If the Committee members fail to reach agreement, or if their recommendations are not approved by Congress by December 23 rd , automatic across-the-board cuts will start by January 1, 2013. The automatic cuts will equal $1.2 trillion minus any cuts recommended by the Super Committee that are enacted into law.
- Social Security and low-income programs such as Medicaid are exempt from the automatic cuts. Medicare beneficiaries will also be exempt but providers of Medicare services will see their reimbursements cut up to 2%.
- Congress is also required to vote on a Balanced Budget Amendment, but there is no penalty if it does not pass.
What can we do?
It's clear that advocacy by individual seniors and our advocacy groups made a difference in protecting Social Security, Medicaid and Medicare beneficiaries from short-term and automatic cuts. However, much work remains in the weeks ahead, when we must:
- Convince the Super Committee not to propose cuts in Social Security, Medicare, Medicaid and discretionary spending programs that are important to vulnerable older adults.
- Press the Super Committee to include increased revenue for deficit reduction from those who can most easily afford it.
Government Relations and Policy, August 2011
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