Super Committee Falls Short, Sequestration Next

November 29, 2011

Last week, the so-called “Super Committee” failed to come to consensus on any recommendations by their deadline as determined by the debt ceiling agreement earlier in the year. NSBA has, from the beginning, urged the Joint Select Committee on Deficit Reduction to embrace a bold, bipartisan solution and provided detailed comments on what the small-business community was willing to support.

According to NSBA’s Mid-Year Economic Report, small businesses ranked “reducing the national deficit” their number one issue for Congress and the administration to address. While the debt ceiling agreement did include some automatic triggers to cut spending in the absence of the Super Committee’s recommendations, those cuts do nothing to address the growing lack of confidence small-business owners have in our elected officials, which will undoubtedly add to their economic uncertainty.

Given the critical role small businesses have played in economic recovery following past recessions and their current inability to create meaningful job growth, this breakdown in lawmakers’ ability to govern is deeply concerning to the millions of small businesses that were looking to Washington, D.C. for some kind of collective leadership.

While NSBA would prefer that Congress negotiate a deficit reduction package that makes intelligent choices among competing priorities, it would be foolhardy to continue down the current path to insolvency. NSBA is urging Congress not to reverse the sequester approved under the debt ceiling agreement until it has developed a replacement budget package that restrains spending and reduces the deficit by a comparable amount.

Sequestration would reduce overall federal spending about 2.7 percent. Programs exempt from automatic spending cuts include Social Security, veterans’ benefits, Medicaid, the Children’s Health Insurance Program (CHIP), unemployment insurance, Temporary Assistance for Needy Families (TANF), food stamps (SNAP) and many others.  The cut to Medicare is capped at two percent.

CBO estimates that, if no legislation originating from the deficit reduction committee was enacted, the automatic enforcement process specified in the Budget Control Act would produce the following results between fiscal years 2013 and 2021:

  • Reductions ranging from 10.0 percent (in 2013) to 8.5 percent (in 2021) in the caps on new discretionary appropriations for defense programs, yielding total outlay savings of $454 billion.
  • Reductions ranging from 7.8 percent (in 2013) to 5.5 percent (in 2021) in the caps on new discretionary appropriations for nondefense programs, resulting in outlay savings of $294 billion.
  • Reductions of 2.0 percent each year in most Medicare spending because of the application of a special rule that applies to that program, producing savings of $123 billion, and reductions ranging from 7.8 percent (in 2013) to 5.5 percent (in 2021).
  • About $31 billion in outlays stemming from the reductions in premiums for Part B of Medicare and other changes in spending that would result from the sequestration actions.
  • An estimated reduction of $169 billion in debt-service costs.

Please click here to view NSBA’s detailed comments to the super committee.

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