September 20, 2011 News

Debt Ceiling Debacle: What Does It Mean for Clinicians?

Resolution of the federal debt-ceiling crisis—the result of an August compromise among elected officials—came in the form of legislation that may affect speech-language pathologists, audiologists, and college students.

President Obama signed the Budget Control Act of 2011 (BCA) into law, raising the debt ceiling and thus averting the possibility of the nation defaulting on its debt for the first time in U.S. history. The statutory limit on federal debt was initiated in 1917 to help finance the United States' entry into World War I. According to the Congressional Research Service, the debt ceiling has been raised 74 times since March 1962—10 of those times since 2001—without the recent vitriolic contentiousness. 

Debt Ceiling Definition  

The debt ceiling, set by Congress, caps the amount of debt the federal government can legally accrue. The cap applies to debt owed to the public (i.e., anyone who buys U.S. bonds) and to federal government trust funds such as those for Social Security and Medicare. Prior to passage of the BCA, the most recent ceiling was set at $14.294 trillion on May 16, 2011. That ceiling was established by adopting various measures, including suspending investments in federal retirement funds, to reduce total debt enough to allow the government to continue borrowing until August 2.

New Legislation  

The BCA raises the debt ceiling and reduces spending in two stages. In the first stage, the debt ceiling would be raised immediately by $400 billion, allowing debt to be paid through September 2011, and then by another $500 billion through February 2013. The second increase is subject to votes on resolutions of disapproval in the House and Senate and to presidential veto (these resolutions allow Congress to vote against the debt ceiling increase while preserving the power of the president to raise it).

In stage one, nearly $1 trillion in deficit reduction is to be achieved by establishing 10-year caps on federal discretionary spending that will impose annual spending limits for most federal agencies and programs. In the initial $917 billion in cuts, almost half will come from "security spending" (including defense, homeland security, veterans' benefits, and State Department). According to a White House fact sheet, 10-year defense cuts will total $350 billion. The remaining spending cuts will come from other agencies and programs, such as the Department of Education and the Department of Health and Human Services. Most of the spending cuts, however, are delayed until later years in the 10-year cycle; $21 billion in cuts will occur in 2012. 

During the second stage, Congress will appoint a special 12-member joint bipartisan committee (three members of each party from each chamber). The joint committee is charged with finding an additional $1.2 to $1.5 trillion in deficit reduction by overhauling the tax code, further reducing spending, and revamping entitlement programs (Medicare, Medicaid, Social Security). The committee must draft legislation by Thanksgiving, and the legislation would be subject to an up or down vote in both houses by December 23.

If the joint committee fails to reach majority agreement on at least $1.2 trillion in deficit reduction, or if Congress fails to enact the committee's recommendations, then an enforcement trigger would automatically force across-the-board spending cuts. Half of the automatic spending cuts would come from defense and national security. However, Medicaid, Social Security, veterans' benefits, civil and military pay, federal retirement plans, and other low-income programs would be excluded from the trigger.

The trigger is designed to give Democrats and Republicans greater incentive to reach a deal. If Congress forces across-the-board cuts, the president could request a second debt ceiling increase of up to $1.2 trillion, subject to congressional disapproval and presidential veto.

The BCA also calls for the House and Senate to vote on a balanced budget amendment to the Constitution before the end of the year. It does not address extending unemployment benefits or reductions in payroll taxes beyond Dec. 31, 2011.

Implications for Members 

The BCA raises a cloud of uncertainty for SLPs, audiologists, and the clients they serve because the conditions of the law are subject to events yet to occur. The stage one scenario includes:

  • Elimination of the in-school interest subsidy for professional and graduate students, including those received by communication sciences and disorders students, and application of those funds to Pell grants (see article).
  • Possible cuts in outlying years to popular programs at the Department of Education—including "Race to the Top"—and to funding of federal education laws, including the Individuals With Disabilities Education Act and the Elementary Secondary Education Act.
  • Possible adverse effects of spending reductions on initiatives related to implementation of the Affordable Care Act, such as funding for state insurance exchanges or expanded Medicaid enrollment.
  • Possible changes to the planned BCA deficit reductions by future elected officials. If party control changes in the Senate, House, and White House, new leaders may seek to reduce or delay spending cuts or, conversely, to increase or accelerate the spending cuts. 

The stage two scenario may include:

  • Congressional approval of joint committee recommendations that might include, for example, savings or reform to Medicare and Medicaid that may involve eligibility, deductibles, co-pays, and funding. 
  • Implementation of the automatic trigger (which is highly likely), leading to across-the-board cuts to Medicare providers and insurance plans, capped at 2% of the cost of the Medicare program. These cuts would directly affect Medicare reimbursement rates. Medicaid funding would not be affected by the trigger.

ASHA members should be prepared to respond to action alerts from ASHA as the committee of 12 meets over the next several months.

George Lyons, Jr. , JD, MBA, director of government relations and public policy, can be reached at glyons@asha.org.

cite as: Lyons, Jr. , G. (2011, September 20). Debt Ceiling Debacle: What Does It Mean for Clinicians?. The ASHA Leader.

  

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