Instead of a weekend marked by round-the-clock negotiations, members of the special House-Senate deficit "Super Committee" spent the weekend pointing the finger of blame at each other, laying the groundwork for the announcement that the panel has failed to reach a deal.
If there is no agreement, that means across-the-board automatic budget changes would begin in the Fiscal Year 2013 budget, starting on October 1 of 2012, from both defense and non-defense accounts.
In other words, even though the Super Committee seems to have failed, it doesn’t mean that the budget will avoid any deficit trimming.
I am going to avoid using the phrase “budget cuts” while describing what’s going to happen here, simply because too often the word “cuts” is used to describe how a scheduled budget increase is just going to be reduced.
So, let’s take a look at the budget numbers involved here.
The overall discretionary budget spending caps would look like this:
- 2012 - $1.043 trillion
- 2013 - $1.047 trillion
- 2014 - $1.066 trillion
- 2015 - $1.086 trillion
- 2016 - $1.107 trillion
- 2017 - $1.131 trillion
- 2018 - $1.156 trillion
- 2019 - $1.182 trillion
- 2020 - $1.208 trillion
- 2021 - $1.234 trillion What's the first thing that strikes you there? The size of the federal budget is slated to increase over the ten year period covered by the August debt limit deal known as the Budget Control Act. So, when we talk about "across the board budget cuts" that would occur in the future because the Super Committee couldn't reach a deal, we are talking about lowering these same spending caps. Here is how the Congressional Budget Office sees this process: "CBO estimates that, if no legislation originating from the deficit reduction committee was enacted, the automatic enforcement process specified in the Budget Control Act would produce the following results between 2013 and 2021:
- Reductions ranging from 10.0 percent (in 2013) to 8.5 percent (in 2021) in the caps on new discretionary appropriations for defense programs, yielding total outlay savings of $454 billion.
- Reductions ranging from 7.8 percent (in 2013) to 5.5 percent (in 2021) in the caps on new discretionary appropriations for nondefense programs, resulting in outlay savings of $294 billion.
- Reductions ranging from 10.0 percent (in 2013) to 8.5 percent (in 2021) in mandatory budgetary resources for nonexempt defense programs, generating savings of about $0.1 billion.
- Reductions of 2.0 percent each year in most Medicare spending because of the application of a special rule that applies to that program, producing savings of $123 billion, and reductions ranging from 7.8 percent (in 2013) to 5.5 percent (in 2021) in mandatory budgetary resources for other nonexempt nondefense programs and activities, yielding savings of $47 billion. Thus, savings in nondefense mandatory spending would total $170 billion.
- About $31 billion in outlays stemming from the reductions in premiums for Part B of Medicare and other changes in spending that would result from the sequestration actions.
- An estimated reduction of $169 billion in debt-service costs. CBO's bottom line: "In all, those automatic cuts would produce net budgetary savings of about $1.1 trillion over the 2013–2021 period." What does that translate to in terms of dollar amounts? The CBO's estimated savings from the automatic budget reductions would be:
- 2013 - $68 billion
- 2014 - $94 billion
- 2015 - $105 billion
- 2016 - $114 billion
- 2017 - $122 billion
- 2018 - $129 billion
- 2019 - $135 billion
- 2020 - $142 billion
- 2021 - $148 billion
- Total of $1.057 trillion over 10 years. So for Fiscal Year 2013, the Congress would have to come up with $33 billion in savings for the military, $21 billion in non-defense spending and $16 billion in entitlement savings. Throw in a couple of slight adjustments, and there is your $68 billion in savings. The next year, the Congress would have to find $46 billion in defense savings, $35 billion in non-defense and $17 billion in entitlement savings – make some smaller adjustments and you are at $94 billion. Remember – Congress had an extraordinarily difficult time just basically keeping the budget the around the same level this past year, let alone making $68 billion or $94 billion in "cuts." And one last thing to remember from a CBO report: "Since 2001, discretionary spending has increased at an average annual rate of 8.2 percent." And now, the Congress is supposed to turn that around every year for the next ten years. One thing I should remind everyone of, is that the Congress could conceivably come in at some point and make a change in this budget plan. Just something to think about as the Super Committee gets ready to admit it wasn't able to come to a Super Deal of any kind.
