2013 Debt Ceiling Increase Debate – Social Security, Medicare, Medicaid, Defense, Education and Food Stamp Spending Cuts

[2013 Update] As I was updating this article, originally written in mid-2011 following the first debt ceiling deal, I got a major sense of deja-vu. After 18 months we are back in the same place with a dysfunctional Congress who barely passed legislation to avert the fiscal cliff.  But it’s my job to write so here I go with details and early rumblings on the 2013 debt ceiling debate. You can see details on the 2011 deal in the update below.

Experts estimate that we will reach the debt ceiling limit sometime in mid February – meaning the government won’t be able to borrow to fund its spending. With federal government spending over 50% more than the revenue’s it brings in (hence the national debt problem we face) the government will have to default on a number of its funding obligations. This includes interest payments on the debt, Social Security, Medicare, Medicaid, defense, education, food stamps and other discretionary spending.  It could also mean a another ‘continuing resolution’ would shut down the government and freeze federal worker wages through 2013. Having to cut 50% of spending means that multiple areas will be affected – and all Americans will feel the impact of these cuts.

Now Congress could easily avert this manufactured crisis by raising the debt limit as has been done in the past. But the House, controlled by the Republicans, is vehemently against raising the debt ceiling without some serious spending cuts to lower the growing national debt. With the President saying publicly that he is against debating the debt ceiling increase and placing the full faith of the US government’s credit rating at risk, we can expect another round of political theatrics over the next few weeks.

I’ll post updates as the debt ceiling story evolves and encourage you to stay in touch via RSS, Email, Facebook or Twitter to get the latest news.


[August 2011 – Debt Ceiling Deal] Part 1 The President announced late on Sunday that Congress and the administration have reached an in-principle agreement to raise the nation’s debt ceiling by $2.1 trillion and cut the federal deficit by as much as $2.5 trillion over a decade. House and Senate leaders must now sell this deal to their parties, before it is passed into law before August 2nd.

Details of the two-stage deal are still being released, but here are some of the known facts that the media are reporting on:

  • The first part of the deal calls for cutting $917 billion over a decade and immediately raising the debt limit by $900 billion. The second stage of the deal calls for the forming of a special congressional super-committee to find another $1.5 trillion in deficit savings by year’s end
  • If the super-committee’s work failed to yield at least $1.2 trillion in debt reduction, sweeping automatic spending cuts would go into effect. These would include cuts in defense programs and Medicare, although other programs — including Social Security, Medicaid veterans, and civil and military retirement – would be exempted. Cuts to Medicare spending would only affect provider reimbursement rates, not benefits, and would be limited to 2%.
  • The White House agreed to forgo an automatic tax increase (part of the bush-era tax cuts) as one of the consequences to kick in if no debt-reduction law is enacted by Christmas.
  • Congress will take a measure to implement a balanced-budget amendment to the Constitution sometime after Oct. 1 and before the end of the year. This was added to the deal to appease Tea party republicans

“The leaders of both parties in both chambers have reached an agreement that will reduce the deficit and avoid default,” President Obama said at the White House. “This compromise does make a serious down payment on the deficit-reduction we need. Most importantly it will allow us to avoid default.”

House speaker Boehner said he had forced Obama to give up his initial demand for a “clean” borrowing increase — one without anything attached — as well as his later call for a “balanced package” that included revenues as well as spending cuts to shrink the deficit. The deal, Boehner said, is all spending cuts and has nothing that violates Republicans’ principles.

America’s AAA credit rating at stake : While the compromise shaping up will probably assuage immediate concerns about default in financial markets, Standard & Poor’s may still cut the nation’s perfect credit rating since the agreement is still temporary and does not cut as deep as the agency has indicated ($4 Trillion) it would have liked.

Markets are up following this deal, but there is still some work to go before the deal is formally approved. Primarily, the Republican Tea party members need to be pacified along with some of the more liberal Democrat members. I will provide further updates on this story and encourage you to stay connected via RSS, Email, Facebook or Twitter.

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