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Friday, December 02, 2011

Politico examines the impact of mandatory cuts to the federal budget

Officially known as sequestration, the $1.2 trillion in mandatory budget cuts, left as a result of the failed 'supercommittee,' are on track to start in January 2013. Jonathan Allen of Politico has compiled a guide explaining the impact of these cuts on different areas of federal spending.

The $1.2 trillion in cuts will be spread out from 2013 to 2021. Tax increases, the presidential salary and Congressional benefits are off the table in the cuts, Allen reports. The cuts will be split equally among defense and nondefense programs. The result, $984 billion in cuts and $216 billion in savings from interest payments, averages "roughly $54.5 billion per year" for defense and nondefense functions.

The cuts will be divided between mandatory spending, ongoing government programs funded based on qualified participants, and discretionary spending, programs Congress approves each year, Allen reports. Both mandatory and discretionary spending will see a percentage reduction for each program during the first year, but in subsequent years discretionary spending will be further reduced until 2021 leaving Congress deciding which additional programs to cut.

What about health care and farm programs, two areas of specific interest to rural residents? While Medicaid and most of Medicare, except Part B premiums, have been spared with the supercommittee's failure, several provisions in the president's health care law are possible future targets. Click here to read a detailed review of possible health care cuts by Brian Depew of The Center for Rural Affairs.

Agricultural programs are not so lucky, since most subsidies are defined as mandatory spending. With spending cuts looming, "farm-state lawmakers in both chambers and both parties" are scrambling "to come up with a bipartisan plan for deficit reduction in areas under their jurisdiction," Allen writes.

Politico's guide was compiled from interviews and analyses by think tanks, the Congressional Budget Office, the Congressional Research Service and Capitol Hill aides

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