By Alex Sange, MPP

After weeks of deal brokering, and just hours before the U.S. Treasury’s predicted default deadline, the President and House and Senate Leadership have agreed on a compromise to increase the debt limit and reduce spending.  The deal was announced Sunday and the legislation was passed by the House with support of Democrats by a vote of 269-161 on Monday.  The Senate is expected to vote today, sending a bill to the President before the predicted default deadline tonight at midnight.  The package all parties have agreed to will yield a two-stage increase of the debt ceiling.

First, an increase in the debt ceiling now in exchange for about $900 billion in cuts to discretionary spending over ten years, split between security and non-security spending.  There are no revenue increases in this round of deficit reduction and savings are achieved by capping discretionary spending. For FY2012, the cap does produce a real decrease in discretionary spending as compared to FY2011. The reduction, however, is far less than the reduction proposed in the previously-passed House budget, meaning additional resources should be available for non-defense discretionary spending, including the Labor-Health and Human Services bill that funds the Health Centers program.

Second, by January next year the President can request an increase in the debt ceiling for an additional $1.5 trillion (to raise the debt limit past the 2012 election) in exchange for an additional $1.5 trillion in deficit reduction made by a newly appointed super-committee of 12 members from both parties and both chambers.  The new committee would have to recommend savings of at least $1.2 trillion by November 23, and Congress would have to pass the recommendations by December 23. Everything- including taxes, discretionary spending, entitlements such as Social Security, Medicare, and Medicaid are on the table for super-committee consideration. If the Congress doesn’t pass the reductions the super-committee proposes (or they don’t propose enough savings), spending would be subject to across the board reductions (called sequestrations) similar to those in Gramm-Rudman-Hollings, the oft-cited budget act passed in 1985.  Like Gramm-Rudman-Hollings, certain programs including Medicaid are exempted from these automatic sequestrations, should they come into effect.

This far-reaching deal will impact both discretionary and mandatory program funding, and could impact both the Health Centers Program and Medicaid directly either now or in a few months.  While NACHC continues to analyze details of the deal closely for the health center-specific impact, it’s important to note that this bill will move much of the decision-making to the newly created congressional super-committee.  With a directive to act before November 23, this yet-to-be-selected group of Senators and Representatives will have a pivotal role in the next round of spending reductions, which could impact both mandatory and discretionary spending in the very near future.

Stay tuned for specifics on the impact to health center funding, and for more updates as Congress and the President finally approve a deal to raise the debt ceiling and the next round of spending reductions gets underway.