01/18/2012

What supercommittee’s failure will mean down the road

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The congressional debt supercommittee’s failure to reach an agreement by its Nov. 23 deadline has made headlines nationwide, and the harsh reality of what this failure means will be felt this year. A broad range of military and domestic programs will be affected as a result of Congress’ inability to make a deal. There’s bound to be a prolonged political battle about the automatic cuts (called “sequestration”), which will be made beginning in 2013.

Not coming to any agreement may seem like the best-case scenario because Medicare, Social Security and Medicaid are excluded from sequestration. However, if Congress and the administration try to avoid the $1.2 trillion automatic sequestration by rewriting existing law, they again could place these programs in jeopardy. This is the situation as the presidential election year begins.

Last year, Democrats tried to find common ground. Republicans would not compromise; instead, they refused to raise any additional taxes to help lower the federal deficit. Specifically, the Republicans refuse to raise taxes on the wealthiest Americans.

“AFT members know what it means to negotiate in good faith, and it is clear that Republicans refused to compromise. The cuts the Republicans wanted were demanding, and without additional revenue, would have exacerbated the current economic crisis and taken a terrible human toll on already struggling Americans, especially women and children,” says AFT president Randi Weingarten.

The AFT has been working hard to protect Social Security, Medicare and Medicaid so that all Americans can have some peace of mind as they get older or as they plan for retirement.

What will sequestration mean? Beginning in 2013, automatic cuts of $1.2 trillion will be implemented over the next 10 years; the cuts will be made equally to defense and non-defense spending. Social Security, Medicaid and Supplemental Security Income, veterans’ benefits, civilian and military retirement programs, and other programs serving low-income families are exempt from sequestration. Medicare cuts would be capped at 2 percent a year starting next year and continuing through 2021. These cuts would not affect benefits but would affect payments to healthcare providers and insurance plans.

Payroll taxes, unemployment benefits and doctor fees

In a scramble to get home before the winter recess, members of Congress were supposed to decide what to do about the payroll tax “holiday,” unemployment benefits, and payments for doctors who treat patients enrolled in Medicare.

Unfortunately, these issues were not resolved when the 2011 legislative session ended; instead Congress punted by allowing current law to stand—but only for two months.

In December 2010, Congress temporarily reduced the employee’s share of the Social Security payroll tax by 2 percentage points, to 4.2 percent of wages. The rate was scheduled to revert to 6.2 percent in January 2012.

It is worth mentioning that the Social Security Trust Fund will be fully reimbursed for this tax. The law requires full repayment with interest on the money from the general revenue fund. Also there will be no reduction in an individual’s Social Security benefits.

There is, however, a concern that the Republicans will use this payroll tax “holiday” as a way to undermine Social Security in the future by urging that the Social Security tax reduction be used to fund private accounts.

This is a fragile time for the U.S. economy. Most economists believe that the payroll tax break and unemployment compensation payments both are essential to avoid a double-dip recession. Also essential is the extension of payments to doctors who treat Medicare patients; these healthcare providers are facing a 30 percent pay cut. Such a drastic reduction could make it difficult for Medicare recipients to find doctors willing to treat them.

Unemployment payments are a lifeline for workers who are out of a job. Many of these beneficiaries, including public employees like teachers, nurses and firefighters, deserve an extension in unemployment insurance.

The fight in Congress will begin anew when senators and representatives return to Washington within the next week—and the clock is ticking. [Lauren Luchi, Bill Cunningham]

January 18, 2012