Tuesday, April 3, 2012

FY'13 House Budget Would Make Massive Cuts

On March 29th, the US House of Representatives approved Budget Chairman, Paul Ryan's (R-WI), House Budget Resolution for Fiscal Year 2013. This represents an outline of the direction that the House Republicans wish to go when it comes to federal spending and sets spending limits for the upcoming fiscal year, starting on October 1, 2012. While the plan does not provide any details on specific program cut backs, it proposes to make more devastating reductions than the amount agreed to in the Budget Control Act (BCA) last August by decreasing non-defense spending by nearly $1.2 trillion. These "savings" could not be achieved without making very deep cuts in crucial safety-net programs, such as CSBG. In addition, the proposal would raise Medicare eligibility from 65 to 67 and impose a voucher program for seniors to purchase insurance; trim $810 billion from Medicaid over 10 years and turn into a block grant program; cut SNAP (food stamps)by $134 billion over 10 years and transform it into a block grant program; and repeal the Affordable Care Act. Finally, the budget outline would continue the Bush tax cuts ($5.4 trillion over 10 years) and lower the tax rate for the wealthiest Americans from 35 to 25 percent ($4.6trillion over 10 years).

By the House Republicans setting a discretionary spending limit of $1.028 trillion which is $19 billion less than the $1.047 trillion agreed upon in the last August, the budget process for this year becomes more complicated. Democrats feel the discrepancy could once again create a scenario of a shut down between the Democratic controlled Senate and the Republican controlled House. Even if a shut down does not occur, it is likely that the government will operate on a Continuing Resolution (CR) until a new Congress (and possibly a new President) sits in January, 2013.

In addition, since the “Super Committee” was unable to reach a compromise last November on ways to reduce the Federal Deficit, there will be $109 billion in automatic, across the boards spending cuts (“Sequestration”) for Fiscal Year 2013 unless Congress finds a way to offset $1.2 trillion before January 1, 2013. Half of the amount is to come from defense spending and the other from domestic programs. The question is how that will be factored into the Fiscal Year 2013 budget in a Presidential Election year where nothing in a “lame-duck” Congress will be agreed upon. Therefore, since a budget probably will not be created until after January 1, 2013, in addition to the fact that the Republicans are not happy about defense spending reductions and Democrats are not thrilled about domestic spending cuts, there is talk in the Capitol that sequestration will not occur until March 2013.