After the Super Committee – What Now?

November 22, 2011

The debate over the long-term fiscal outlook of the nation will continue.  The 112th Congress could take action in 2012.   No matter what Medicaid cuts and/or reforms were contained in the super committee’s recommendations, ANCOR believed that they were only the first step in efforts to address budget deficits, federal spending, and entitlement reforms.  Expect legislative activity in this arena in 2012 and as a part of the debates surrounding the 2012 elections.  No matter the results of the elections, ANCOR expects greater focus in this arena in 2013.  For now keep the following in mind:   1.  The Budget Control Act has already authorized a total of nearly $2 trillion in cuts over the next 10 years to reduce the federal budget deficit. 2.  The impact of the failure of the super committee to reach agreement may have some short-term positive affects on states.  
  • Nearly three-fourths of federal funding that states receive is exempted from the automatic cuts scheduled for 2013.
  • Medicaid is exempt from the sequester cuts, so states largest expense will not receive less federal funding.
  • Also exempt from automatic cuts are federal funds for the Children’s Health Insurance Program, Temporary Assistance for Needy Families, Supplementation Nutrition Assistance Program, and highway programs.
  • The other cuts in domestic discretionary funding will not take place until 2013, rather than 2012, providing states more time to build revenue.
  • All total, about 75 grant programs of significance to states would be affected by the sequestration cuts.  Education and community development and housing programs will be hit the hardest.
However, it is possible that Congress could change the legislation regarding the automatic cuts.  Prior to the super committee’s announcement yesterday, some members of Congress (Senators McCain (R-AZ) and Graham (R-SC), and House Armed Services Chairman McKeon (R-CA) have already stated that they would introduce legislation to alter the automatic trigger, thereby preventing future cuts on the grounds that $600 billion in cuts over 10 years to defense and Pentagon budgets were too much and a threat to the nation’s security. President Obama Says No.  Following Monday’s announcement, President Obama stated:  I will veto any effort to get rid of those automatic cuts to domestic and defense spending.  There will be no easy off ramps on this one. There is still plenty of time for Congress to act, and there are a range of issues that demand their immediate attention.