January 19, 2017

CBO Predicts Lopsided Impact From Automatic Cuts

  • The national debt has grown significantly in recent years due to rising annual deficits. A deficit occurs in any year the government spends more...

In a new report, the Congressional Budget Office (CBO) has estimated the automatic spending cuts that would occur if the super committee is unsuccessful. The committee has the goal of reducing the deficit by at least $1.5 trillion over ten years. If legislation saving at least $1.2 trillion is not enacted by early 2012, the automatic spending cuts will be triggered and go into effect in 2013.

These cuts would apply to both discretionary and mandatory spending. However, partial exemptions for mandatory programs such as Social Security, Medicaid and Medicare would cause the cuts to fall largely on annual appropriations.

Mandatory spending will claim almost 60 percent of the budget over the next ten years, though CBO estimates that it would account for only 13 percent of the automatic spending cuts. Seventy-one percent of the cuts would come from discretionary appropriations and the remaining 16 percent would be the result of lower debt service costs.

Defense spending alone would be cut by $454 billion over ten years-- in addition to the $350 billion in defense cuts that OMB estimates were already included in the law raising the debt limit.

CBO’s estimates are a reminder that exempting mandatory spending and revenues from deficit reduction will require increasingly large cuts to discretionary spending that is less than half of the budget. To effectively address our nation’s fiscal challenges, revenue policies and mandatory spending that drive deficits must also be on the table.