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Five Things You Need to Know About the Debt Ceiling Deal

It’s been a few days now since President Obama signed the debt ceiling deal, averting a catastrophic default (at a steep price). But the deal is complicated, and questions – as well as some misinformation – are still floating around the internet. Here are five key points worth remembering:

  1. The deal does not fully exempt Medicaid, Medicare, Social Security or other entitlement programs from cuts. It is true that Medicaid, Medicare, Social Security and other entitlement programs are spared from the nearly $1 trillion in cuts over ten years specified in the debt ceiling deal, which apply only to discretionary programs (i.e., non-entitlement programs funded through annual appropriations). And Medicaid, Social Security, Medicare benefits, and most entitlement programs that low-income people depend on, like SNAP (food stamps) and Temporary Assistance for Needy Families (TANF), are exempt from automatic cuts if the “super-committee” established by the deal does not come up with an additional $1.2 trillion in deficit reduction over ten years (or if Congress does not pass the super-committee plan).

    But – and this is a big “but” – the super-committee can include in its deficit reduction plan any cuts to any entitlements that a majority of its six Republican, six Democrat membership agrees on, and those cuts will go into effect if Congress passes the super-committee’s proposal in the up-or-down vote that must occur before the end of this year.

  2. Some programs for low-income people are not protected from cuts at all. The protections in the debt ceiling deal for Medicaid, Medicare, Social Security, and other entitlement programs are important, even if they are not as far-reaching as some might think. But entitlement programs are not the only ones that support low-income women and families. A wide range of important programs – including Head Start, some funding for child care assistance, the nutrition program for low-income women, infants, and children (WIC), meals-on-wheels, Title X family planning services, and low-income housing and energy assistance – are part of the discretionary budget that is subject to cuts in every stage of the debt limit deal (the initial $1 trillion in cuts, the super-committee process, and the automatic cuts that take effect if the super-committee process fails). For more details on how the debt ceiling deal will affect programs for women and their families, see our new fact sheet.

  3. It’s not only the federal government that will see cuts as a result of the deal. State governments have been strapped for cash and laying off workers since the recession began, and most are still facing budget shortfalls. Federal discretionary funding has helped states close budget gaps somewhat; one-third of federal non-security discretionary spending goes to state and local governments to fund education, health care, infrastructure, and other vital programs and services. But federal nonsecurity discretionary spending is the same category that accounts for most of the nearly $1 trillion cuts in the first stage of the debt ceiling deal, and could be cut more through the super committee process (and definitely will be cut more by the automatic cuts that take effect if the super committee process fails). Reductions in federal funding may force states to make even deeper budget cuts, meaning local health and education services as well as jobs for teachers, nurses, law enforcement officers and many others are at risk.

  4. The super-committee can raise revenue. Contrary to some assertions by House Speaker John Boehner (R-OH), the debt ceiling deal does not require the super-committee to achieve at least $1.2 trillion in deficit reduction through spending cuts alone. The super-committee can recommend any amount of revenue increases. While it will undoubtedly be politically challenging for a group evenly divided among Republicans and Democrats to agree on revenue-raising measures, the super-committee must include substantial revenue in its deficit reduction plan to avoid extreme cuts to programs and ensure that millionaires, billionaires and corporations – who have not yet been called upon to contribute a penny to deficit reduction – pay their fair share. (For another top five list focused on the need for revenues, see Chuck Marr’s new post on CBPP’s blog.)

  5. The debt ceiling deal does not promote job creation or economic growth. The deal allows the U.S. to continue paying its bills, which is good for the economy in the sense that default would surely have been disastrous for the economy. But standing alone, the deal does nothing to reduce the 9.1 percent unemployment rate or grow the economy; it just cuts spending, which will mean more job losses – especially for women, who have actually lost jobs since the recession ended over two years ago.

    However, the super-committee can take steps in the right direction by seeking further deficit reduction from revenues and by including investments in its plan – like an extension of federal emergency unemployment benefits – that will boost the economy now and ensure lower deficits in the long term. If the super-committee is to wield its powers to help the vast majority of Americans who are still struggling, its approach to deficit reduction must be very different than the one reflected in the debt ceiling deal.

Comments

Social Security

I don't understand why SS is called a entitlement program. I have paid into this program my entire working life. This is my money that is paying for SS. The money is gone because our legislatures took it. I want them to give it back. I no longer trust our government & our leaders. Both parties are to blame for this problem. I am done with them. It's time for the people of this country to stand up and hold them accountable.

Social Security

Far rt Republicans and Tea Party members have put the negative spin on "entitlement programs". Those who can actually read, dont understand english. Entitlement = you are entitled to that money. Its yours have paid in to it your whole working life. Same for Medicare. Take it and be proud.

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