Friday, July 15, 2011

Debt Ceiling Increase in Exchange for Budget Cuts?

A bill will be considered on the House Floor next week (final details pending). It will contain spending reforms in exchange for a debt limit increase. An overview of the plan is below.

The Current Plan

The current plan cuts total spending by $111 billion in FY 2012. The savings are divided as follows: reduce non-security discretionary spending below 2008 levels, which saves $76 billion; $35 billion cut to non-veterans, non-Medicare, non-Social Security mandatory spending; defense budget at President’s Budget level.

Total federal spending is scaled back based on the glide path for the fiscal years below:
  • 2012, 22.5% of GDP
  • 2013, 21.7% of GDP
  • 2014, 20.8% of GDP
  • 2015, 20.2% of GDP
  • 2016, 20.2% of GDP
  • 2017, 20.0% of GDP
  • 2018, 19.7% of GDP
  • 2019, 19.9% of GDP
  • 2020, 19.9% of GDP
  • 2021, 19.9% of GDP
A final component of the plan allows an increase in the debt limit but requires the passage of a Balanced Budget Amendment before granting the increase.