Debt Talks Continue Amid Dangerous Lack of Consensus: Potential Impact on
O&P Still Unclear
Congressional leaders are clamoring to find middle ground this week on a
debt-ceiling deal as the deadline for raising the limit draws closer,
raising the serious prospect of a U.S. default. If Congress does not act to
raise the debt ceiling on or before August 2nd, the United States will not
be able to borrow enough money to cover the country’s debts, leading to
potentially catastrophic economic harm throughout the country and across the
globe. Although federal officials are quick to note that they are unsure how
hard markets would be hit, most economists agree that failing to raise the
ceiling would cause the economy to spiral downward. It is also unclear what
payments the government would cease to pay first, though without an eventual
fix to the problem, the entitlement programs such as Medicare and Medicaid –
two payers of O&P services – would inevitably suffer. The markets continue
to fluctuate with this uncertainty.
The current political climate has made it tougher to negotiate a fix, either
short or long term. First, Congress and the White House are gearing up for
the 2012 Presidential election, the first after the historic election of the
nation’s first African American president and the first after the rise of
the so-called Tea Party which brought to Congress legislators firmly
committed to reigning in government spending. Fiscal conservatives are using
the debt ceiling deadline to zero in on their goal of downsizing government.
Finally, the economy continues to grow very slowly out of the recession and
this applies even more pressure to already stretched entitlement and social
service programs. Add to those variables the budget crunch that
cash-strapped states are facing and healthcare providers, such as O&P
professionals, have reason to be worried.
While conservatives want to rein in spending and prefer to offset any raise
in the debt ceiling with cuts to spending, and no tax increases, liberals
prefer to offset the debt ceiling with a combination of spending cuts and
tax increases, while protecting entitlement programs. President Obama has
spent the past few weeks attempting to broker a compromise, and although
press reports have indicated that there were times when a deal could have
been close, negotiations ended abruptly twice in the past three weeks.
Initially, the President called for Congressional leaders to strike a
“grand” bargain, one that would include entitlement cuts, tax increases, cut
the deficit by about $4 trillion over 10 years, and lift the debt ceiling by
$2.5 billion. However, political developments early this week indicated that
shorter term fixes are perhaps more likely.
Yesterday, Senate Majority Leader Harry Reid (D-NV) released a plan that
would raise the debt-ceiling enough to cover the nation’s financial
obligations through next year’s election, while cutting spending by about
$2.7 trillion- the same amount by which the debt-ceiling would be raised.
Notably, Medicare and Medicaid cuts are not part of Senator Reid’s plan at
this time. But the plan would establish a joint congressional committee to
identify future savings. The committee’s recommendations would be guaranteed
an up-or-down Senate vote, without amendments, by the end of 2011. This
means that all of Washington would be focused on entitlement reforms to
Medicare and Medicaid, and possibly Social Security, throughout the fall.
Meanwhile, House Speaker John Boehner (R- OH) released a separate proposal
that calls for a vote in the fall of 2011 to amend the U.S. Constitution to
require a balanced budget. The plan also raises the debt ceiling through the
end of calendar year 2011 by $1 trillion and cuts about $1.2 trillion in
spending. The plan would achieve these cuts by capping discretionary
spending and implementing across-the-board cuts if the caps were exceeded.
The House plan also calls for a joint committee to report, and Congress to
approve, a deficit-cutting package by December 23rd of this year. If this
were to occur, President Obama would receive the remainder of the borrowing
authority needed to cover the remaining $1.7 trillion of deficit spending
through the 2012 elections. If the plan were to stall in Congress, President
Obama would face another debt deadline early in 2012.
The President and House Democrats have said that they would like to avoid
another vote next year on the debt ceiling. President Obama recently
indicated his support for the Reid plan and presented his case for its
passage in a nationally televised appearance last evening. Shortly
thereafter, House Speaker Boehner also spoke to relate his perspective on
the stalemate. Today, the two parties appear no closer to a compromise while
the clock ticks down to the August 2nd deadline.
Whether or not Congress is able to agree with the President to raise the
debt ceiling in the short or long term, a failure to significantly cut
spending may force a first-ever downgrading of the U.S. bond rating. The
consequences or this are unprecedented but it would clearly be a setback in
the effort to revive the U.S. economy and likely raise interest rates.
Spending cuts in the $4 trillion range will necessitate reforms to the
Medicare and Medicaid programs, and this is what Congress is expected to be
focused on this fall, assuming a significant deal is agreed upon.
Orthotic and prosthetic professionals, through NAAOP and like-minded
national organizations, must remain vigilant not only during the short-term
negotiations, but during the long months ahead during which Congressional
leaders continue to address the deficit through more specific reforms to
Medicare and Medicaid.
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