The Debt Ceiling Deal: Background and its impact on vulnerable Ohioans Featuring: Emily Campbell, Public Policy Fellow at the Center for Community Solutions Lisa Hamler-Fugitt, Executive Director of the Ohio Association of Second Harvest Foodbanks (OASHF) Ericka Thoms, Policy Associate, Voices for Ohio’s Children (VFC-OH) LarkeRecchie, Executive Director, Ohio Association of Area Agencies on Aging (O4A) Kathleen Gmeiner, Project Director of Ohio Consumers for Health Coverage (a project of UHCAN Ohio)
Emily CampbellPublic Policy FellowThe Center for Community Solutions 216-781-2944 x357 www.communitysolutions.com
On August 2, the Budget Control Act of 2011 (S. 365) became law. It authorizes a debt ceiling increase of at least $1.2 trillion. A. Debt-ceiling increase of $900 B: Immediate authority for $400 B increase. Request additional $500 B increase that Congress can “disapprove”. Reduction of $900 B over 10 years through discretionary spending caps. B. Debt ceiling increase of $1.2 T - $1.5 T: Congress passes constitutional Balanced Budget Amendment = automatic $1.5 T increase. Supercommittee successful = automatic increase equal to amount of deficit reduction ($1.2 T - $1.5 T). Supercommittee fails = increase of $1.2 T and sequestration of equal amount of spending.
Budget Control Act of 2011 establishes a Joint Select Committee charged with producing legislation that would reduce projected deficits. Many low-income programs are exempt from sequestration:
Child care entitlements to states
Child nutrition entitlement programs
Children’s Health Insurance Program including child enrollment contingency fund
Child support enforcement and family support programs
Temporary Assistance to Needy Families including Contingency Fund
Commodity Supplemental Food Program
NOTE: Cuts to all non-exempt programs would take effect in January 2013 and spread through 2021. Any of following events would trigger automatic, across-the board cuts (aka sequestration): Committee does not report required legislation by Nov 23, 2011. Committee produces legislation, but bill is defeated in Congress. Committee produces legislation, bill passes Congress, but bill is vetoed, and veto is sustained. Committee produces legislation, bill is enacted, but new law reduces deficits by less than $1.2 T.
Lisa Hamler-Fugitt Executive DirectorOhio Association of Second Harvest Foodbanks(614) 221-4336 ext 222www.oashf.org
Political and Economic Landscape & Threatens the Safety Net
Last election - perceived as a mandate by the majority to: cap spending, cut government, reduce the deficit and balance the budget.
Nation’s fiscal crisis has made deficit reduction the top issue in Washington. It will continue to dominate all fiscal policy discussions and will be the backdrop for everything from the debt limit increase to FY2012 appropriations to the upcoming Farm Bill reauthorization.
Round 1: The White House and Congressional leaders have come to an agreement to raise the nation’s debt ceiling through 2012 and reduce the deficit by at least $2.1 trillion over 10 years.
Too little…..Too late!
Political and Economic Landscape & Threats to the Safety
S&P Downgrade – the first time in history
Dangerous economic impact – DJI fell 1,762 Points in 10 days, loss of 15% - Trillions in retirement and savings wiped out.
Threatens our Nation’s Fiscal Standing and other ratings
Could cause a double dip recession or worse yet, the second Great Depression (higher unemployment/poverty/hunger)
DC and our elected officials are disconnected from real world realities and the hardships their constituents face everyday.
“We didn’t need a rating agency to tell us that the gridlock in Washington over the last several months has not been constructive, to say the least,” President Obama
TIMELINE FOR IMPLEMENTING THE BUDGET CONTROL ACT Congress will immediately begin work implementing the Budget Control Act, which outlines a multi-stage process for both deficit reduction and the debt ceiling increase. August 16: 12 members must be appointed to the special Joint Committee September 30: FY2012 appropriations must be completed or a temporary continuing resolution must be approved before the new fiscal year begins on October 1 October 14: Deadline for standing committees to provide recommendations to the Joint Committee about cuts and reforms to programs under their jurisdiction. November 23: Deadline for the Joint Committee to vote on a bill December 2: Deadline for the Joint Committee to release legislative language of its bill December 9: Deadline for standing committees to provide favorable or unfavorable recommendation on Joint Committee bill December 23: Deadline for the House and Senate to vote on the Joint Committee bill December 31: Deadline for the House and Senate to vote on a Balanced Budget Amendment January 15, 2012: Date that across-the-board sequester of non-exempt programs will be triggered if Joint Committee bill is not approved January 2, 2013: If triggered, date that across-the-board sequester of nonexempt programs is implemented
Joint Committee members announced
Senate Minority Leader McConnell picked Jon Kyl of Arizona and two newcomers to the Senate with vast economic expertise, Pennsylvania's Pat Toomey andOhio's Rob Portman.
House Speaker John Boehner chose a member of his leadership team, Texan Jeb Hensarling, to co-chair the panel with Democratic Sen. Patty Murray of Washington. Dave Camp and Fred Upton, both of Michigan were the two remaining members names to the committee.
Yesterday, Senate Majority Leader Harry Reid picked Senators John Kerry and Finance Committee Chairman Max Baucus and Patty Murray to the committee.
We are awaiting the release of the final 3 democratic members to be named.
Process: Reduce the deficit in two stages Stage One: The first stage deals only with cutting spending and is focused only on discretionary spending, programs which rely on the annual appropriations process for funding. The bill places a 10-year cap on discretionary spending, resulting in $917 billion in savings over 10 years. Discretionary caps would begin in FY2012 and extend through FY2021.
Discretionary caps would not be applied across-the-board, meaning that we have an opportunity to defend nutrition and safety net programs from cuts. Congress could choose to protect certain programs from cuts – or even increase their funding – by instead making cuts to other programs. Discretionary programs include TEFAP administrative funding, CSFP, WIC, EFSP, National Services, Farmers Market, many more.
Both security and non-security spending is subject to caps.
Different caps are applied to security and non-security spending in the first two years. For fiscal years 2012 and 2013, there is a “firewall” between security and non-security spending, designed to ensure that proportional spending reductions are derived from each category.
The law specifies contingencies for unanticipated spending, such as disaster relief and war spending. The caps would not apply to the wars in Afghanistan and Iraq. The cap for disaster relief would be based on historical averages for such funding.
Process: Reduce the deficit in two stages Stage Two: The second stage of deficit reduction could include both spending cuts and revenue increases. A new Joint Committee composed of 12 members – 3 Republicans and 3 Democrats from each chamber – is charged with crafting deficit reduction legislation that achieves at least $1.5 trillion in deficit reduction over 10 years.
The legislation could be composed of cuts to discretionary programs, cuts to mandatory programs, entitlement reforms, and/or tax increases.
The legislation must be submitted to Congress by November 23 and approved by Congress by December 23.
The legislation will move outside of the normal committee process, but standing committees will have two opportunities to provide input.
If legislation is not approved by December 23 with at least $1.2 trillion in deficit reduction, the Joint Committee loses its expedited authority and an automatic sequester would be imposed to achieve $1.2 trillion in cuts.
If Congress approves deficit reduction legislation with less than $1.2 trillion in deficit reduction, the sequester imposed will be the difference between $1.2 trillion and the amount approved by Congress.
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Policy & Advocacy Considerations
Applying separate caps to security and non-security spending in the first two years is meant to ensure that cuts are spread across security and non-security spending. The separate caps mean that Congress will not be choosing between cutting defense programs and cutting safety-net programs. Instead, each will be evaluated within its own category:
Because the definition of “security” spending is expanded to include programs beyond the Department of Defense, programs that support veterans, first responders, and international development will be pitted against DOD programs for cuts within the security category.
Separately, nutrition assistance programs will compete within a smaller pool of discretionary non-security programs that includes many other low-income safety net programs, such as Head Start, LIHEAP, EFSP, CSBG, and CDBG.
Policy & Advocacy Considerations
Ericka ThomsPolicy AssociateVoices for Ohio’s Children(216)-881-7860www.vfc-oh.org
Children’s Programs Exempt from Sequestration
Child care entitlement to states
Child nutrition entitlement programs (this does not include WIC)
Child Support enforcement and family support programs
Children’s Health Insurance Program
Foster care and permanency programs
Refundable tax credits (including the Child Tax Credit and the Earned Income Tax Credit)
SNAP (formerly Food Stamps)
Supplemental Security Income (SSI)
Temporary Assistance to Needy Families (TANF)
All of these programs are “on the table” for the Joint Committee. So advocacy on these programs will be important between now and when the Committee presents its final legislation to be voted on by Congress.
What do we want?
Protection and support for children, families and the programs they rely on.
Solid fiscal policy that does not put our children’s futures at risk.
The Aging Network: What is the impact of the federal debt ceiling deal? Ohio Association of Area Agencies on Aging (o4a)
Impact of the Debt Ceiling Deal
Discretionary programs like the Older Americans Act face painful cuts under the spending caps
Discretionary programs are not protected from the second round of drastic cuts
If revenues are not included in the second round of deficit reduction, the cuts to entitlements will need to be that much deeper.
The deal will reduce the amount of federal funding available for community-level aging programs at a time when our economy is still struggling and our nation’s population is rapidly aging.
More people will face waiting lists for critical OAA services—such as home care, home-delivered meals and medical transportation—
Less help with heating/cooling bills from LIHEAP,
Reduced availability of affordable accessible housing, and
Similar strains to other federally funded community-level programs.
Impact of Debt Ceiling Deal
If Medicaid cuts come to fruition, home and community-based services (HCBS) waivers are particularly vulnerable.
The select committee can consider Medicare and Social Security as other sources of deficit reduction dollars. Reduced benefits or raised costs will place a burden on millions of older and/or disabled adults who rely upon these social insurance programs for economic and health security.
Impact of Debt Ceiling Deal Programs designed to cut future costs such as CLASS Act on chopping block The Elder Justice Act which was passed after years of advocacy is in jeopardy of not getting funded Cuts to Medicare hurt the ability of Home Health providers and nursing homes to absorb state cuts Federal government “lets states off the hook” for providing home and community care
Don’t forget – Advocacy Works! Congress is on recess. Contact your Senators and Congressman Now Tell them we can’t afford more cuts, revenues are needed to address deficit issues. Larke Recchie firstname.lastname@example.org Ohio Association of Area Agencies on Aging http://www.ohioaging.org/default.aspx
Medicare and Medicaid Under the Debt Ceiling Agreement Kathleen GmeinerProject DirectorOhio Consumers for Health CoverageUHCAN-Ohio(614)-456-0060uhcanohio.org
Debt Ceiling Compromise
First stage: Caps immediately placed on discretionary spending, saving $917 billion over 10 years. Medicare and Medicaid are entitlements, and aren’t cut in this phase
Second stage: Bipartisan Joint Committee cuts $1.2 – 1.5 trillion in spending over 10 years, backed up with automatic cuts effective January 1, 2013 if Congress doesn’t reach agreement. Medicaid exempted from the automatic cuts.
Second Stage – What’s at Stake?
So Medicaid is protected if the automatic cuts go into effect; what about Medicare?
Across-the-board cuts to Medicare are limited to 2 percent (about $10 billion) of the program’s costs and can only come from cuts to providers and insurers.
Second Stage – What’s Really At Stake There will be tremendous pressure on Congress to come up with a deal, to avoid automatic cuts, 50% of which would come from the defense budget. Possible Medicare Cuts:
Raise Medicare eligibility age (in the original “grand bargain” proposal)
Raise Medicare cost-sharing (in the original “grand bargain”)
Possible Medicaid Cuts
Shift more costs to the states
Repeal of Maintenance of Effort requirement in the ACA (was earlier proposed in the State Flexibility Act)
“Blended Medicaid Match Rate,” (Reducing the 100% federal match for newly eligible Medicaid recipients to a weighted rate for all Medicaid beneficiaries) This could lead to erosion of support for the Medicaid expansion in the Affordable Care Act.
What needs to be done to cut Medicaid and Medicare costs?
Payment reform – pay for outcomes, not volume of services, e.g. reduce payments to hospitals for hospital-acquired harm.
Utilization of Affordable Care Act opportunities such as “Health Homes” and other patient-centered efforts to coordinating a care among providers.
Resources: The Insider (Community Catalyst); Say Ahhh! (Georgetown University Center for Children and Families); Center on Budget and Policy Priorities.
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