WASHINGTON, Oct 21 (Reuters) - The deadline for the U.S. congressional “super committee” to produce a deficit-cutting plan is just a few weeks away with no clear sign the panel will overcome partisan differences and succeed.
The legislation that established the panel of six Democrats and six Republicans also put in place an enforcement mechanism that will trigger automatic cuts if the committee fails to reach agreement on $1.2 trillion in budget savings 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. Below are some questions and answers on what happens if no deal is made.
Across-the-board cuts equal to $1.2 trillion over 10 years would start in January 2013. 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.
But it is possible Congress may not allow the cuts to take effect. Congress has the ability to vote to rescind some or all of the spending cuts.
Republican Senator Jon Kyl, a super committee member, has vowed to lead the charge against more military savings and it could become a powerful issue in 2012 presidential and congressional election campaigns.
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 and any across-the-board cuts triggered for 2013 would be against those appropriated amounts.
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.
The Social Security retirement program is exempt from the automatic spending cuts. The Medicaid healthcare program also is 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 hospital groups.
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.
Failure by lawmakers 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.
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 retirement benefits.
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.