Some Straight Talk on the Debt Deal
There has been a lot—perhaps too much—written about the debt reduction bill, its potential impact and its implications—long on rhetoric, but short on facts and details.
If you are as confused as I am, you may want to read the following concise and straightforward summary I just received from the Military Officers Association of America (MOAA). It is preceded by:
The agreement, signed by the President on Tuesday, sets a course for future reductions in federal spending. But the compromise is remarkably short on details and relies largely on the budget cutting recommendations of a soon to be formed Congressional “Super Committee.” In many ways the deal reflects the inability of Congress to come to terms with spending cuts.
Here’s what the MOAA knows about the deal:
• Enacts $900 billion in federal spending cuts over 10 years
• Cuts include $350 billion in savings from the base defense budget already agreed upon earlier this year
• Authorizes the President to increase the debt limit by at least $2.1 trillion, eliminating the need for further increases until 2013
• Establishes a Congressional bipartisan Joint Committee, often referred to as the “Super Committee,” tasked with identifying an additional $1.5 trillion in debt reduction, including discretionary (e.g., pay raises, procurement, etc.) and direct (e.g., Social Security, TFL) spending; the Committee will also consider tax revenue measures
• Requires $1.2 trillion in cuts if the “Super Committee” fails to reach an agreement, or Congress fails to pass the committee’s recommendations by December 23.Cuts would be divided between defense and non-defense defense spending
• Ensures a vote on a balanced budget constitutional amendment by December 2011
The MOAA Adds:
Now that the deal is done all eyes will turn to the Congressional “Super Committee” made up of 12 members of Congress, six from each chamber, and six from each party. Their debt reduction recommendations are due November 23, 2011. Congress is required to vote on their recommendations without amendment by December 23, 2011.
The Super Committee is authorized to look at both discretionary and direct (mandatory) spending meaning that military retirement, TFL, Social Security, etc., are on the table for cutting.
However, if the Committee cannot reach an agreement on how to cut an additional $1.5 trillion from the debt or if their recommended cuts fail to be adopted by Congress, an enforcement mechanism (sequestration) will trigger automatic, draconian spending reductions starting in 2013. The cuts would be split 50/50 between domestic and defense spending (defense spending cuts would be about $50 billion per year). The severity of this process is intended to force Congress to act and prioritize what reductions should be made.
If sequestration is employed Social Security, Medicare beneficiaries (but not providers), federal civil service retirement, military retirement and low-income programs will be exempt from mandatory cuts.
The MOAA message concludes with concerns about “the prospect of sequestration if Congress fails to reach a $1.5 trillion deal by December 23”:
These automatic cuts would rely heavily on defense spending reductions. Although military retired pay, Social Security, and Medicare beneficiaries are protected from these cuts it could leave TRICARE and Medicare providers extremely vulnerable. The magnitude of these cuts may prevent a “doc fix” this year which would deeply hurt access to care.
And this is only the beginning of several years of successive budget reductions. Both the right and the left are looking to reduce defense spending and the quickest way there is cutting manpower and compensation…