The failure of the congressional supercommittee to agree on deficit reduction measures triggered a process called sequestration. It requires budget cuts of $984 billion divided evenly between defense and non-defense programs over a nine-year period — a figure based on the $1.2 trillion that the supercommittee failed to cut minus the interest that will be saved as the deficit is reduced.
What programs of special importance to you could be affected? AARP asked Stan Collender, a leading expert on the federal budget. Collender, the author of The Guide to the Federal Budget, has worked for both the House and Senate budget committees and is now a partner at Qorvis Communications.
Q: With sequestration — across-the-board budget cuts — how are Social Security, Medicare and Medicaid likely to be affected?
Medicaid and Social Security are exempt [from cuts] if the sequester occurs. Cuts to Medicare are limited. Benefits are not touched at all. Payments to providers are reduced by a maximum of 2 percent. That’s it.
In the wake of the supercommittee’s failure, are Social Security beneficiaries more vulnerable to having their benefits cut?
Not right now. Look, everybody knows that at some point push is going to come to shove with Social Security — that the amount it takes in won’t be enough to deal with the benefits.
At some point, one of two things is going to happen: Either we are going to need to find an additional source of revenues or we are going to have to change the benefits. The additional source of revenues could be anything from paying out of general revenues to eliminating the cap on Social Security taxes or anything in between. On the benefits, it could be that they are going to means-test them — I don’t know.
Even though Social Security is not part of sequestration, the Social Security Administration could take a hit. Might that have an impact on beneficiaries?
The Social Security [Administration] may have to contribute something — maybe not a full across-the-board cut, but it could be that the administration of Social Security could suffer somewhat. It could be that intake and processing times are a little bit slower.
How could other programs affected by sequestration? Take the Older Americans Act, for example, which provides assistance to states and area agencies on aging.
Well, it is in the part of the budget that could be hit by sequestration. Whether it will be or will not be is up to the president, but it is vulnerable. It’s definitely at risk.
You say it’s up to the president. So that means he could head off such cuts?
Yes. After they determine exactly what has to come out of domestic discretionary spending, there is very little that is specified. And the White House at that point doesn’t have to treat all programs equally. Some could get hit by smaller cuts and some could get hit by larger cuts to make up the difference.
Is Meals on Wheels in the same category?
And other nutritional programs for older Americans?
Could transportation services for older and disabled Americans be affected?
Yes, absolutely. The one thing I would tell you is that, yes, there are programs that deal specifically with seniors, or that seniors take advantage of, that could be affected.
For example, my understanding is that seniors are some of the biggest users of national parks. So if national parks find their hours cut back or the number of rangers reduced or maintenance reduced, it probably won’t be as pleasurable for seniors who have gotten used to vacationing there or touring the country.
They’re in a battle with others for scarce dollars?
Yes, including NIH [the National Institutes for Health], research into diseases, the Centers for Disease Control. They [older Americans] may have particular needs and particular benefits from certain programs as part of a particular population, but they are also going to be affected by everything else in the budget in one form or another. Even education — they all have kids and grandkids.
There is a scenario that Congress might simply undo sequestration.
I think it is actually likely that sequestration will not go into effect as currently scheduled on Jan. 2, 2013.
Let’s take a step back. The original reason they put sequester and the supercommittee in place had nothing to do with the deficit. It had to do with getting past the debt ceiling.
It worked. They got the debt ceiling raised. They are through that. But the only way to get that done was to promise some action on the deficit.
There was never a consensus about how to reduce the deficit. So one of the pieces of the plan — the supercommittee — already has failed. I am not sure it was ever designed to succeed, but it didn’t.
The only remaining part of the plan is the sequester, and you already have people suddenly realizing, “Whoa, this actually includes spending cuts. We don’t like spending cuts.” Or, “Our constituents don’t like spending cuts.” Or, “Our contributors don’t like spending cuts.”