What debt ceiling results mean for senior citizens
A few weeks ago I wrote on the negotiations going on in Congress regarding raising the national debt ceiling.
Now that the Budget Control Act of 2011, which incorporates the compromise on the debt ceiling, has passed and been signed into law, senior advocates have been working on analyzing its effect on programs including Medicare, Social Security and Medicaid.
First, some observations might be in order.
Was the debt ceiling debate really necessary now? As I observed in my last column, Congress has raised the debt ceiling 10 times since 2001. During the Bush administration alone, the ceiling was raised in 2002, 2003, 2004, 2006, 2007, and twice in 2008. Republicans insisted on deficit reduction this time and that deficit reduction come only from the spending side and not from additional revenue. Democrats insisted on protections for Medicare, Medicaid and Social Security. Each side got some of what it wanted, not all.
Was the debt ceiling debate desirable? Recently Standard and Poor’s rating service downgraded U.S. sovereign debt from AAA to AA+ as a result of the debt negotiations. Moody’s Investors Service and Fitch Ratings, other competing services, both affirmed their AAA grades on U.S. debt, and U.S. ratings are still ahead of other countries, including China. However, this S&P decision can affect interest rates, the stock market and, to some extent, recovery. Reading between the lines, the reason for the downgrade was the recent dissension. Bloomberg News in an online article on Monday, “S&P Seen Surrendering to Tea Party Costing U.S. Taxpayer,” reported that “S&P officials, shrugging off a $2 trillion calculation error (made by them in arriving at their decision to downgrade), blamed “uncertainty” in the policymaking process …” There are some who think it is not a great idea to focus on serious spending cuts at a time when Americans are looking for jobs anyway.
What does the Budget Control Act say? Several questions are left unanswered. Here is an overview.
Step One. The debt ceiling is raised by $400 billion initially which may be followed by a further increase of $500 billion if requested by the President subject to a congressional motion of disapproval that the President may veto. There will be a first round of budget cuts where $917 billion is to be cut over 10 years of which $21 billion is to be applied to the first year, fiscal year 2012. It seems that reviewers are not too seriously concerned about this first procedure since the budget reduction occurs over time and legislation might be amended.
Step Two. Congress is to establish a Joint Select Committee on Deficit Reduction which is now being referred to as the “Super Committee” to come up with debt reduction legislation by Nov. 23, 2011 (the day before Thanksgiving this year). There are to be 12 members, an even number of Democrats and Republicans drawn from each branch of Congress. These people have not been named yet. They are to cut $1.5 trillion over the next 10 years. Their proposal, if any, is not to be amended and is to be voted on by Congress before the end of the year. This plan could make cuts to or restructure Social Security or Medicare or Medicaid.
Step Three. If there is no plan which reduces at least $1.2 trillion in cuts over 10 years, or the members cannot agree or Congress does not adopt the plan (any of which seems very possible considering the last round of negotiations), then there would be across-the-board spending cuts equal to the amount that could not be agreed upon up to $1.2 trillion in a process known as sequestration which would apply to
fiscal years 2013 to 2021. Here, there is protection for Social Security, Medicaid, Medicare beneficiaries, civil and military employee pay and veterans benefits but, otherwise, $600 billion would need to come from the defense budget and $600 billion from domestic programs. A limited amount can be taken from Medicare providers (i.e. doctors, hospitals and related).
There are no changes at this point to tax breaks for hedge fund managers or oil companies or reductions in the ethanol tax credits or deductions for companies that send jobs overseas. Whether this will continue remains to be seen.
For more, listen to “50+ Planning Ahead” a weekly radio program on WCHE 1520 on every Wednesday from 4:30 pm to 5:00 pm with Janet Colliton, Colliton Law Assocs., PC, and Phil McFadden of Home Instead Senior Care.
About the Author Janet Colliton
Esquire, Colliton Law Associates, P.C. Janet Colliton has practiced law for over 38 years, 37 of them in Chester County, Pennsylvania, a suburb of Philadelphia. Her practice, Colliton Law Associates, PC, is limited to elder law, Medicaid, including advice, applications and appeals, and other benefits planning including Veterans benefits, life care and special needs planning, guardianships, retirement, and estate planning and administration.