Debt Ceiling Deal Erodes Public Protections, Government Services

The debt ceiling deal signed into law Aug. 2 will remake the federal budget process in the years to come. The procedures put in place by the new law are complex, and the final budgetary outcome will depend on a variety of factors. With $841 billion in immediate budget cuts, and with up to $2.5 trillion in total deficit reduction over the next 10 years, the law, known as the Budget Control Act (BCA), will have a profound effect on everything from public and environmental protections to education to federal information transparency.


The first part of the law is relatively simple. It mandates hard limits on total discretionary spending for the next ten fiscal years (FY), and if Congress allocates more funding than the budget caps allow, the amount of the overrun will be cut across all discretionary programs equally. Underneath the caps, Congress can allocate spending to federal programs however it wants, meaning some programs might be cut to allow for the growth of other programs. The Congressional Budget Office (CBO) estimates that these caps will cut $841 billion over ten years compared to its baseline, which grows the federal budget at the pace of inflation.

For a complete run-down of how the new debt deal works, see OMB Watch's FAQ.

In addition to the discretionary budget caps, the law calls for the creation of a special joint committee of Congress, made up of 12 members. The majority and minority leadership of both houses have chosen three members each, leaving this so-called Super Committee with six Democrats and six Republicans, three from each house. This group will have until Nov. 23 to produce a proposal to reduce the deficit by at least $1.2 trillion over the next ten years. The Super Committee can raise revenue or cut any program, including Social Security, Medicare, and Medicaid, in creating a deficit reduction plan. Nothing is off the table.

If the Super Committee plan isn’t enacted, a set of automatic, across-the-board cuts are triggered, starting with the FY 2013 budget. In addition to lowering the original discretionary spending caps, this process would also cut mandatory spending for the next nine years. All of these cuts are equally split between defense and non-defense spending, while certain programs, such as programs for low-income families, Social Security, Medicaid, and most of Medicare, are protected.

Spending Caps

The first spending caps in the law go into effect for the coming fiscal year, FY 2012, the budget that Congress is currently debating. Compared to the FY 2011 budget, the first year’s cuts are relatively small, only $7 billion. A cut this small will effectively freeze federal programs at their current levels, meaning fewer new programs and limitations on the services they currently provide to the American people. However, compared to the CBO baseline, which accounts for inflation, the budget cap for FY 12 is far below – about $44 billion – where federal spending is projected to be. In essence, then, a budget cap that seems to be holding federal spending constant is, in fact, slowly eroding its value.

The FY 12 budget cap represents an increase over the budget level the Republican-controlled House set earlier in 2011. Since the House has already completed work on about half of the yearly appropriations bills that make up the annual budget (at levels about $30 billion lower than the spending cap), House and Senate legislators will have to negotiate how and where to add money back to the deep cuts passed in the House. For instance, the House had slated the Labor-Health and Human Services-Education appropriations bill to be cut by almost 12 percent, a reduction of $18 billion. If Congress adheres to the debt ceiling agreement, this funding should be restored before that spending bill sees the president’s desk.

However, while the BCA sets the upper limits of overall discretionary spending, it does not prevent spending below those levels. House Republicans will likely push for cuts below the already agreed-to spending cap in an effort to bring spending closer to their budget. The debate over the FY 12 funding level, with Democrats arguing for keeping spending as close to the cap as possible and Republicans demanding more cuts, will be the next big budget fight, and it has the potential to be just as dramatic as recent battles, with a similar potential for a government shutdown.

How Automatic Cuts Could Be Triggered

If the Super Committee cannot agree on at least $1.2 trillion in deficit reduction measures, then automatic, across-the-board cuts will be triggered. Beginning in FY 2013, spending cuts will be remarkably more drastic than those in FY 2012. Approximately $109 billion more will be cut from the budget, with half coming from defense spending and half from non-defense. In total, FY 13 discretionary spending will be reduced by $156 billion below the CBO baseline, an amount equal to the budgets for the Departments of State, Interior, and Transportation. Non-defense discretionary spending will see approximately an eight percent cut from the previous year’s funding level, but when compared to the CBO baseline, or what the spending level would be if it kept pace with inflation, the cut is close to 13 percent.

These deep and sweeping cuts will affect everything from education, employment programs, environmental protections, food safety programs, weather tracking, transportation, and renewable energy research. The result will be a noticeable deterioration of those public structures that support the economy and most Americans’ daily activities.

These cuts will also have important ramifications for citizens’ access to the government. Staff to handle Freedom of Information Act requests; the Government Printing Office, which, as we highlighted in an earlier Watcher article, provides access to congressional bills, the U.S. Code, and the Code of Federal Regulations; and maintenance of websites that provide federal spending information will all see cutbacks.

If non-defense discretionary spending is decreased by 13 percent under such automatic cuts, almost every program is likely to see funding reductions. Few, if any, programs will see budget increases, since any increase in funding must come out of another program. These cuts will likely result in heavy staff reductions in every agency, which would mean fewer meat inspectors policing the nation’s slaughterhouses and packing plants; fewer personnel reducing waste, fraud, and abuse in government contracting; fewer staffers monitoring Wall Street; and fewer FBI and CIA agents tracking down terrorists.

Paradoxically, the automatic cuts could be the lesser of two evils. The BCA allows the Super Committee to target any program for spending cuts, including Social Security, Medicare, and Medicaid. No programs are untouchable through a Super Committee deficit package.

What the BCA Doesn't Say Could Pose a Risk to Crucial Public Protections and Services

There’s another feature of the debt ceiling deal that should trouble those who value the services and protections provided by the government: the BCA does not forbid the Super Committee from inserting provisions into its proposal that do not directly affect the deficit.

The likelihood of this occurring should not be underestimated, and one recent example of such behavior is illustrative. House Republicans mounted a considerable effort earlier in 2011 to insert some 80-plus "policy riders" to FY 2011’s budget, despite the fact that most of these provisions were policy-related and had little or nothing to do with the budget. The representatives' wish list included undoing health care reform, defunding Planned Parenthood, gutting a slew of environmental protection rules, and prohibiting the Federal Reserve from using money to create a new consumer finance protection bureau.

The BCA mandates an up-or-down vote on any committee-approved package in its entirety, with no amendments allowed. This means that any policy riders that survive the committee process would be attached to the package, and Congress would have no opportunity to remove them. With a $1.2 trillion trigger set to go off, Congress will feel the urgency to approve the deal, greatly enhancing the prospect that a raft of conservative special interest provisions become law.

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