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The Trigger

August 24, 2011 - by Donny Shaw

As has been the fate of every other bipartisan congressional sub-group that has met recently to talk about cutting deficits, the most likely outcome for the supercommittee is gridlock. The supercommittee is split evenly between the parties, and the members that have been chosen are probably too partisan to achieve a grand bargain on taxes and spending that can win a majority vote. If gridlock occurs, an automatic spending cut trigger that Congress created in the debt ceiling bill will go into effect. Let’s take a look at how that would work.

Date of Enactment

The trigger would not take effect until January of 2013. This delayed enactment might actually make gridlock in the supercommittee more likely. The debt ceiling bill directs the supercommittee to create a deficit reduction plan that would take effect beginning in 2012. That means that any concessions the parties make in the supercommittee package would go into effect before the 2012 elections and voters would have a chance to respond to any tax increases or government-service cuts they may experience as a result. Under the trigger, Congress would get a nearly two-year pillow before having to face voters again, and it would be another four years under voters had the chance to elect a new President.

Defense

The trigger calls for annual spending cuts to be split evenly between defense spending and non-defense spending (with some exemptions that I’ll explain further down). The defense budget function includes funding for the military, nuclear-weapons programs, the NSA, and some other national defense services. It’s by far the biggest area of non-mandatory federal spending — bigger than all other areas combined. That means that even though defense would be taking half of the cuts in the trigger, it would still be allowed to grow and it would still increase as a proportion of total federal spending. As much as many on both the left and right would like to see cuts to defense, the military and the defense industry employs hundreds of thousands of American and cutting funding to them could lead to mass layoffs and slashes to benefits for service members.

Non-Defense

All other areas of non-defense spending would share the other half of the required cuts. Approximately $15 billion of the annual non-defense cuts would hit mandatory programs, so the share of cuts to be split each year between non-defense discretionary spending would be about $39 billion. In 2013 the cuts would happen evenly through a presidentially-ordered sequestration that would slash budgets for each category proportional to their 2012 baseline. Each year after that it would be up to congressional appropriators to decide how to divvy up the cuts. There are hundreds of federal programs that would be up for cuts, including things like foreign affairs programs, border security, the FAA, the National Science Foundation, the National Institutes of Health, special education, and more.

Medicare and Mandatory Programs

Medicare would take the brunt of the mandatory-spending cuts, about $12 billion per year. Another $3 billion or so would be spread among other mandatory programs. Importantly, Medicare beneficiaries would not experience the cuts directly. Instead, all healthcare providers that provide services to Medicare patients would face a 2% reduction in their government compensation. The rest of the mandatory spending cuts would come from things like crop insurance, health care fraud and abuse control, the FHA, the crime victims fund, highway safety, etc. Most of the largest mandatory programs are exempted, however including Medicaid, Social Security, food stamps, S-CHIP, veterans’ benefits and federal retirement funds.

If you want to read the legislative text of the trigger for yourself, you can do so right here.

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