Federal debt debacle causes concerns
The federal debt ceiling increase agreement signed by President Obama Aug. 2 did little to solve the debate about how to reduce the nation’s debt load, with many major decisions left to be made by a special congressional “super committee” in November. In the meantime, the potential for further cuts in federal spending have left many local government officials uneasy about their own already shaky financial standing.
The debt ceiling agreement requires an initial reduction in federal spending of $917 billion over 10 years, according to the Washington-based National Association of Counties (NACo). The “super committee” will identify additional future spending cuts of $1.2 to $1.5 trillion, for a total of around $2.4 trillion. If the committee fails to cut at least $1.2 trillion, cuts will automatically go into effect across multiple departments to make up the amount.
While most of the larger cuts will occur after 2013, the deal likely will lead to more than a half-trillion dollars in cuts to non-security discretionary funding, from which most federal grants to local governments are drawn, over the next 10 years, according to NACo. “We are in for a long ride of budget uncertainty in protecting our programs,” NACo Executive Director Larry Naake said in a statement.
NACo cites projections that domestic programs will be cut by up to 6.7 percent. That could include large cuts to the Medicaid program that would shift costs to state and local governments, and NACo said in an Aug. 8 article for its bi-weekly newsletter, “The super committee will almost certainly have to consider large reductions in federal Medicaid spending in order to meet the $1.5 trillion goal.”
Also, if Republicans continue to insist that the debt issue be addressed without any increase in tax revenues, Congress will have to cut $240 billion from programs like the Community Development Block Grant program each year to achieve the $2.4 trillion savings in 10 years, according to an analysis from the Washington-based U.S. Conference of Mayors (USCM). “Cuts of this magnitude could lead to the elimination or drastic reduction in many local programs,” USCM says in its analysis.
Communities around the nation’s capital, such as Manassas Park, Va., are particularly concerned about any deeper cuts in federal spending. Most of that small city’s residents are federal employees who could lose their jobs as a result of the cuts, says Manassas Park City Manager Jim Zumwalt, adding that the city’s revenues already have been hard hit by the recession. “If the more draconian cutbacks are imposed, that definitely will have an impact on our community,” Zumwalt says.