Highlights of the deficit-reduction package:
After a near-freeze in 2013, discretionary spending will increase by about 2 percent a year, which is sure to spark infighting as defense hawks and backers of domestic programs wrangle over who gets the money.
It’s up to the appropriations committees to allocate the money, picking winners and losers from among programs like school aid, housing subsidies, defense, foreign aid and health research – among others – along with bureaucracies like the Environmental Protection Agency, the IRS and the Housing and Urban Development Department.
Both security and nonsecurity programs will absorb outright cuts in 2012. Defense hawks are protesting likely cuts to the Pentagon, which would have received a $17 billion, 3 percent increase under a recent House spending bill. The Pentagon is among a group of programs that together will absorb a $4 billion cut from current levels next year. Other programs in the security category include foreign aid, intelligence, homeland security and veterans’ programs.
This second wave of spending cuts will focus on so-called mandatory programs whose spending levels are set by formula. They include Medicare, the Medicaid health program for the poor and disabled, farm subsidies and federal retirement programs.
The committee is likely to borrow from numerous sources in producing the cuts, including Obama’s fiscal commission, a group led by Vice President Joe Biden and talks involving House Speaker John Boehner and Obama himself. Options include increasing copayments for Medicare and military health care and prescription drug coverage, cuts in direct cash payments to farmers, sales of broadcast spectrum to telecommunications companies and rules restricting insurance policies that supplement Medicare.
Republicans vow the panel won’t propose tax increases as called for by Obama and fellow Democrats.
If a majority of the committee agrees on a plan, it would receive a vote in both the House and the Senate. If the panel deadlocks or fails to produce at least $1.2 trillion in additional cuts, or if Congress fails to enact its recommendations, the White House budget office would impose spending cuts across much of the federal budget, including the Pentagon, domestic agency budgets and farm subsidies. Many federal benefits programs, however, would not be covered by this, including Social Security, Medicaid, and veterans’ and federal retirement benefits.