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Deficit Committee Folds With No Plan

Automatic cuts won’t affect Social Security and Medicare benefits

Medicare doctor payments unresolved

The committee's failure sets up not just the automatic cuts but also potential negative reactions from financial markets and an unresolved fight over Medicare doctor reimbursement rates.

Medicare's reimbursement rate for doctors is scheduled to drop by 27 percent at the beginning of next year. Congress has faced a similar deadline in previous years and always done a last-minute "doc fix" to prevent the increase.

"The cut to doctor pay — 27 percent is substantial — would likely lead to more doctors refusing to take Medicare patients," Certner says.

Sepp says the supercommittee might have been able to settle that issue for the long term as part of a large deficit reduction deal. But now it will be part of a year-end scramble along with other expiring provisions such as extra unemployment compensation benefits for workers who have been out of jobs long term and a 2 percent cut in payroll taxes. Certner says more than half of seniors don't pay income taxes. But a worker making $50,000 a year would have an extra $1,000 to spend if the payroll tax break is continued. Lawmakers must weigh that help to the economy against the additional deficit spending it causes.

Tough choices await after election

The heart of the real dispute over how to get control of the nation's deficit — raising taxes and changing growing spending programs like Medicare — likely will wait now until after the 2012 presidential and congressional elections.

The six Republicans and six Democrats on the supercommittee worked for months to find a deal. But the effort devolved into finger-pointing. Republicans claimed that Democrats want to raise taxes at a time the economy can ill afford it, and Democrats charged the GOP with going after critical safety net programs such as Social Security and Medicare.

"There's a fundamental disagreement on how to approach the big issues, particularly Medicare and tax increases," Certner says. "It may be we need an election to settle that."

With economists and panels of experts calling for $3 trillion to $4 trillion in deficit reductions over the next decade, the issue will not disappear.

Certner says all the ideas that were on the table before the committee still will be under consideration. Those ideas included increases in patient costs for Medicare, a formula for a smaller cost-of-living increase for Social Security and getting rid of many tax loopholes.

Ed Coyle, head of the Alliance for Retired Americans, says advocates for older people need to continue to be on guard. "At a time when so many retirees are struggling to get by, and when today's workers wonder if they will ever be able to retire, it is unconscionable that Republicans continue to eye cuts to these programs as a way to fund an extension of tax cuts for the wealthiest Americans," Coyle says.

Next: 'We are deeply divided.' >>

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