Plenty of uncertainty ahead with federal spending cuts

President Barack Obama gestures during a news conference in the East Room of the White House in Washington, Wednesday, June 29, 2011. (AP Photo/Charles Dharapak)
August 1, 2011 7:18:06 PM PDT
If you're looking for a definitive list of where Congress will impose spending cuts, you're going to be facing months of uncertainty. The wrangling you saw between Democrats and Republicans in the past week is only the beginning.

One trillion dollars in spending cuts will be triggered when President Obama signs the Budget Control Act of 2011 following ratification by Congress. About a third of the $1 trillion will be cut from defense spending.

"It is a sizeable chunk, but it's only about a half of 1 percent of defense spending across the decade that these cuts would be stretched out to," says Kori Schake, an expert in defense budgets and strategy and a research fellow at the Hoover Institution.

Schake thinks retirement benefits to military personnel might be modified to save money. Then even deeper cuts, totaling $1.4 trillion, will be made by a 12-member bipartisan commission before the end of the year. That's when specific services and programs may face cuts that could impact a wider spectrum of the public.

"If you don't get an agreement on the $1.4 trillion, that's another $600 billion or so that would come to defense," says Schake. "That starts to be real money and places where you start talking about having to cut divisions out of the Army and carrier groups out of the Navy."

The commission's potential targets might include $60 billion in extended jobless benefits and Medicare benefits. An official with the Santa Clara County Public Health Dept. indicated that payments to Medicare providers could be cut if the Commission cannot reach an agreement. If that happens, that might reduce the number of providers available and increase the demand for public health services.

Down the road, there is also concern about federal funding for transportation projects. Rod Diridon, executive director of the Mineta Transportation Institute at San Jose State University, says existing funding won't be rescinded. However, long-term infrastructure improvements and transit projects might not see any federal dollars.

"Now there's this whole backlog of transportation infrastructure projects in the nation that keep us from being competitive internationally... getting people to work and products to the marketplace is the key to being competitive," says Schake. "And we're lagging the rest of the world in those characteristics now."

Anyone wanting a definitive list of federal program and service cuts will have to be patient. The bipartisan commission has a deadline of Thanksgiving to do the deep cuts that lie ahead.


Load Comments