The clock is ticking on the congressional “super committee” tasked with creating a new debt deal before the Thanksgiving recess, and there is no sign that Republicans and Democrats will be able to make an agreement. As a result, millions of Americans will likely soon start feeling the effects of the $1.2 trillion in cuts to defense and discretionary spending scheduled to take place under the “trigger” of the old deal.
Under the old debt ceiling deal reached in August a large amount of defense and discretionary spending cuts were already agreed upon to increase the statutory debt limit through 2011. However, the same deal mandated even more cuts be implemented either by agreement of the new “super committee” or by the “trigger mechanism.” The deadline for a deal is the Thanksgiving recess, but, in fact, the committee will have to reach an agreement much sooner in order to write the legislation and push it through both chambers of Congress in time.
The problem is that both sides of the super committee seem nowhere close to an agreement.
Democrats released a plan that looked very similar to the “grand bargain” that President Obama proposed to Speaker Boehner earlier this year. The Democrats plan would rely on a fairly balanced mix of revenue increases (or new taxes as Republicans call them) and spending cuts to defense, Medicare, Medicaid, and discretionary programs.
Republicans countered with a plan that includes almost no revenue increases, but much larger cuts to Medicaid, Medicare, Social Security, and discretionary programs. The key sticking point is the revenue increasers, and specifically an expiration of the Bush tax cuts for the wealthy. The Democrats argue that if entitlement programs, like Medicare, are to be cut, then the Bush tax cuts for the wealthiest Americans must be allowed to expire as well. Many Republicans have signed a pledge vowing to not raise any taxes, even on the wealthiest Americans. If both sides stick to their position, as anticipated, the “trigger” of the old deal will officially be pulled.
The problem for Americans is that the “trigger” has some painful cuts in areas critical to the economy. Half of the $1.2 trillion in cuts would come in defense spending. These cuts would likely lead to thousands of layoffs within the Pentagon and the defense industry. In addition, the Pentagon is considering new cuts to the pension and benefits of retired service members. The other $600 billion in cuts would come from discretionary programs. The good news is that programs for the poor, such as Medicaid, would be exempted. Still, even with these exemptions, the cuts would certainly mean thousands more loss jobs in the public sector as the economy continues to struggle. Every day federal services that the public relies on like background checks and park access may be limited, slowed, or altogether eliminated due to the trigger cuts.
In the past none of this would have been an issue. Under previous administrations the debt ceiling was routinely raised without any accompanying spending cuts or revenue increases. However, Republicans in the House demanded dramatic cuts for the last debt ceiling increases, and in the coming month Americans may begin to realize the full extent of those spending cuts agreed to last August.