WASHINGTON Nov 15 A Nov. 23 deadline for the
U.S. congressional "super committee" to agree on a plan to cut
the federal deficit is drawing near with no sign of a deal in
sight, raising concerns about what will happen if the panel
The legislation that established the panel of six Democrats
and six Republicans put in place an enforcement mechanism that
will trigger automatic cuts if the committee fails to reach
agreement on $1.2 trillion in deficit cuts over 10 years.
Triggers would also would kick in if the super committee
plan is rejected by Congress, if President Barack Obama vetoes
it, or if the panel presents only a partial deal. It would take
more than a year before the first cuts take effect and they
could ultimately be reversed by Congress.
Below are some questions and answers on what happens if no
deal is reached.
WHAT HAPPENS IF THE COMMITTEE FAILS TO AGREE?
Across-the-board cuts equal to $1.2 trillion over 10 years
would start in January 2013. Furthermore, Bush-era tax cuts are
set to expire at the end of 2012 and tax rates would snap back
to pre-2001 levels if Congress fails to act.
Washington has been running annual deficits of more than $1
trillion since 2009. Most financial analysts say that cannot
continue indefinitely without creating a debt crisis similar
than the one that is now hitting Europe and hurting global
If the panel comes up with only a partial deal, the
remainder would come through automatic cuts.
The cuts would be split equally between defense and
non-defense programs. In reality, only about $984 billion in
cuts over 10 years would be ordered because the legislation
allows for lower interest payments on the U.S. debt after
taking into account deficit reduction.
The Center for Budget and Policy Priorities calculates that
$54.7 billion in cuts would be ordered annually in both defense
and non-defense spending from 2013 through 2021. For defense,
that would be on top of $350 billion in cuts over 10 years
already enacted into law.
U.S. defense spending, including war costs, has been around
$700 billion a year.
It is possible Congress may not allow the cuts to take
effect. Congress has the power to vote to rescind some or all
Republican Senator Jon Kyl, a super committee member, has
vowed to lead the charge against more military savings.
Republican Senators John McCain and Lindsey Graham already are
working on legislation to stop any military spending cuts
triggered. Those spending cuts could become a powerful issue in
2012 presidential and congressional election campaigns.
The White House has said Obama would block any effort to
roll back automatic spending cuts.
DO LAWMAKERS HAVE ANY SAY ON THE TRIGGERS?
Yes, to some degree. Spending caps would be set for broad
categories of government programs and senior lawmakers will
have authority to allocate money to programs within those caps.
By January 2013, Congress will have agreed on spending levels
for the fiscal year that starts Oct. 1, 2012, and any
across-the-board cuts triggered for 2013 would be against those
Obama would be free to exempt some or all military
personnel funding from the automatic cuts. If he does, funding
cuts for other defense programs would go up.
If the automatic cuts are triggered, Congress could still
take all of 2012 -- an election year -- to rescind or change
any of those spending cuts.
While the deficit-cutting action taken by the current
Congress could be undone by lawmakers following the November
2012 elections, it also could be scrapped by the new Congress
that will be seated in January 2013.
WHAT HAPPENS TO MEDICARE AND OTHER PROGRAMS?
The Social Security retirement program is exempt from the
automatic spending cuts. The Medicaid healthcare program is
also protected as are veterans' benefits, food stamps and a
handful of other programs to help the poor and disabled.
While Medicare benefits would be spared from the automatic
cuts, payments to hospitals and other healthcare providers
would be reduced. But those cuts would be limited to 2 percent
a year. Still, the idea of provider cuts on top of those
included in Obama's healthcare overhaul has upset doctors and
Farm price supports, food safety, education, foreign aid,
public safety and law enforcement budgets would all be hit with
across-the-board spending cuts, as would low-income housing and
energy assistance and other government functions.
The top Democrat on the House Appropriations Committee,
Representative Norm Dicks, warned that automatic cuts would
force reductions at the Commodity Futures Trading Commission
and the Security Exchange Commission that would make it hard
for those agencies to enforce rules and investigate fraud.
ARE THERE OTHER CONSEQUENCES OF FAILURE?
Failure to overcome partisan differences and come to grips
with U.S. deficits could fuel public disgust with lawmakers and
feed anti-incumbent feelings in 2012 elections.
It also will not diminish the need to tackle well-known,
long-term budget imbalances that are unsustainable. Spending on
healthcare and retirement programs will rise sharply and
consume an ever greater share of the federal budget as the
77-million-strong baby boom generation, born between 1946 and
1964, retires and draws on government benefits.
Lawmakers have to face that demographic reality by cutting
spending on those programs or raising taxes. Most financial
experts agree that borrowing ever more money from China and
other investors is not a sustainable option.
Some credit rating agencies have warned of a potential
downgrade of the top-notch AAA U.S. debt rating if Congress
fails to rein in U.S. deficits and the costs of health and
Standard & Poor's lowered its U.S. rating by a notch in
August because political brinkmanship in the fight to raise the
U.S. debt limit raised questions about Washington's ability to
deal with long-term deficits.
Moody's Investors Service and Fitch Ratings maintained
their top rating for U.S. debt but warned that additional
deficit reduction would be needed order to keep it.
A credit rating downgrade could lead to higher interest
rates across the U.S. economy. But some analysts note that U.S.
interest rates actually fell after the S&P downgrade.