What does “no deal” from the super-committee mean?

written by Steve Berg
November 23, 2011

The news is out: the “super-committee” was unable to make a deal.  What does that mean, particularly for local communities that are struggling with homelessness?

The super-committee was created by the Budget Control Act (BCA) of 2011, the deficit reduction law that Congress passed this past summer.  As a quick review, that law contained two major provisions to reduce federal debt:

  • An overall cap on federal “discretionary” spending (spending that is determined year-by-year through the congressional appropriations process, including virtually all HUD programs and all other targeted homelessness programs), starting in FY 2012. These caps generally keep increases in spending below the expected rate of inflation for the next ten years.
  • Deeper cuts over nine years, beginning in FY 2013, totaling an additional $1.2 trillion in spending reduction.  This second set of cuts could have been avoided had the super-committee proposed and Congress passed legislation to reduce the projected federal debt by $1.2 trillion through other mechanisms.

So with the super-committee process having produced no alternative, the additional $1.2 trillion in cuts is scheduled to take place, beginning in January 2013.  These cuts will come from domestic programs as well as defense and security programs.  They include some “mandatory” (as opposed to “discretionary”) programs but most mandatory programs that affect low-income people are exempt:MedicaidSSISocial SecurityTANFSNAP (formerly called food stamps).  All VA programs are exempt from cuts as well.

However, HUD programs, as well as Health Care for the Homeless, SAMHSA homelessness grants, education for homeless children and youth, RHYA programs, and other targeted homelessness programs, are not exempt.

One thing to note – by January 2013, FY 2013 will have already begun, so for that year the Budget Control Act requires a “sequester:” an across the board cut to all non-exempt programs below the level that Congress appropriated for FY 2013. For FYs 2014 to 2021, appropriators will, from the beginning, base their work on the deeper discretionary caps.

To give some idea of the scope, let’s look at the total amounts of federal discretionary spending for a few select years (thanks to OMB Watch for the figures, which are estimates):

2010 — $1.089 trillion (enacted)

2011 — $1.049 trillion (enacted)

2012 — $1.043 trillion (mandated by step 1 of the BCA)

2013 — $953 billion (mandated by step 2 of the BCA)

The cuts beginning in FY 2013 are obviously extreme. Between FY 2012 and FY 2013, discretionary funding will be cut by nearly 9 percent.   If HUD receives a proportionate share of this cut, it means FY 2013 spending on HUD programs would drop by nearly $4 billion, compared to the $1 billion that HUD programs are losing in FY 2012 compared to FY 2011.

Congress and the President, of course, have the authority to throw out the spending caps that were in the BCA or to suspend them in any way they see fit.  This could happen before or immediately after the 2012 election, perhaps as soon as the new Congress comes into office in January 2013.

There is a good deal of talk on Capitol Hill about doing just that, although President Obama is discouraging it.  The second set of BCA cuts was designed as an incentive for the super-committee to come up with an agreement, not necessarily as good policy in its own right. In fact, if the top priority goal of overall domestic policy right now is more jobs, then short-term cuts in federal spending are exactly the wrong thing to do.

But it would probably not be a good idea to count on Congress reversing these cuts.  For some time to come, competition for limited federal discretionary resources will likely be extreme.  On the other hand, “no deal” means the historic Medicaid expansions scheduled for 2014 are still the law, SNAPS and SSI can expand if the number of people in poverty continues to rise, TANF will stay intact, and no harmful changes are planned to the Low-Income Housing Tax Credit or the Earned Income Tax Credit.  At least that’s the law for now.  Work to end homelessness will need to take account all of these changes, relying less on increases from HUD and more on the large antipoverty entitlement programs.

At the same time, it will be important to make the strongest available case for HUD resources, while getting the most we can out of existing funds.  Together, we will have to focus on efficient and cost-effective solutions, while convincing Congress to prioritize funding for the most vulnerable Americans.

These are things we are more than capable of doing.  The Alliance looks forward to continuing to partner with you to get the best possible results for homeless people.