NEW YORK STATE RURAL ADVOCATES

Where does the new debt limit agreement leave our community based programs?  Are the people who need help the most in jeopardy? Here’s an excerpt from the National Rural Housing Coalition on “what it may mean”:

“…On August 2, the President signed into law the Budget Control Act of 2011.  This legislation increases the debt limit for the government by $2.4 trillion.  However, unlike past laws that raised the debt limit in one lump sum, the Budget Control Act increases the debt limit in stages and requires that those increases be offset by measures to reduce spending or raise revenue:

• The immediate $400 billion increase in the debt limit will be followed by a second $500 billion adjustment in the debt ceiling this fall.  The law contains a convoluted procedure that almost ensures the first $900 billion is approved;
• The first $900 billion is offset by a cap on discretionary appropriations. For FY 12, domestic discretionary accounts are cut by $5 billion from the current rate and only grow by inflation in the out years.  Over a 10 year period, an expanded definition of security programs – to include Defense, State Department, Homeland Security, and Veterans Affairs – only grows by roughly inflation, as well.  The savings, along with $20 billion from mandatory accounts and reduced costs for interest on the debt, $917 billion, with most of the savings coming in the out years.  The FY12 total for discretionary accounts is $1.043 trillion, which is nearly $100 billion below President Obama’s February budget proposal; and
• Another $1.2 trillion to $1.5 trillion will be available depending on a new committee called the Joint Select Committee on Deficit Reduction that is assigned to report a major deficit reduction bill by late November.  Congress must vote on this legislation by December 23^rd.  Alternatively, if the Joint Select Committee effort fails, an automatic across the board cut – totaling $1.2-1.5 trillion – would be applied equally to Defense as well as most other domestic programs, again over a 10 year period.

On Spending

 

The agreement provides some hope for peace on appropriations.  In 2011 Congress reduced domestic discretionary spending by $40 billion. The Budget Control Act reduces FY 12 spending by an additional $5 billion. However, this amount is $24 billion higher than the House-passed budget resolution.

 

The House Budget Resolution cut $47 billion from domestic discretionary accounts.  Of that amount, $17 billion was transferred to Defense and the balance went to deficit reduction.   Of that $47 billion, $23 billion in cuts were ascribed to Transportation-HUD (-$5 billion) and to Labor-HHS (- $18 billion). Because of the deep proposed reduction in the topline number, the House Appropriations Committee postponed mark-ups for both bills.  It is likely, but not certain, that most of the money added by the new law will go to those to bills.  The agreement also provides money outside the appropriations process to cover a shortfall in Pell Grants that totaled $10 billion.

 

There are still likely to be substantial cuts in programs.  There are 10 appropriations bills at some stage in the process with $24 billion in cuts.  The new money averts total disaster, but not by much.

 

With the end of the fiscal year looming, it is likely that the House Appropriations Committee will begin assembling a continuing resolution or omnibus appropriations bill.   The Senate may schedule a series of appropriations mark-ups in the fall to have something on the record, but inevitably, Congress will be well into the autumn before appropriations bills are completed. However, with both sides having agreed to a top line number, the process should go a little more smoothly.

 

Joint Select Committee on Deficit Reduction

 

While Congress has rid itself of most of the responsibility of approving or disapproving, the first $900 billion in new debt, it will, however, be on the line to come up with offsets on the last $1.2-1.5 trillion between 2012-2021.  The Joint Select Committee on Deficit Reduction will be equally divided between Republicans and Democrats – three each appointed by the Speaker of House and the Democratic leader and the Senate Majority and Minority Leaders.  The task of this Committee will be to come up with substantial savings by Thanksgiving with an up or down vote in both Houses by December 23^rd.

 

If history is any guide, Democrats will push tax increases or new revenue, and Republicans will push entitlement program reductions, and a deadlock will result.  The two sides even disagree on whether taxes or revenue are part of the mix, and the baseline for revenue and tax expenditures.  So deadlock is a real possibility.

 

If the Committee cannot reach agreement, its recommendations are not approved by Congress, or vetoed by the President, then the new law brings back an old concept – a sequester, or across the board cut – to cover the cost of the additional debt increase.  In the 1980’s Congress enacted the Gramm-Rudman-Hollings Act which did exactly that.   Under the law, most programs – excluding Social Security, Medicaid, and Medicare benefits – but including Defense, will be subject to the sequester. The sequester would take place in 2013. “