On Tuesday, with just hours left before facing debt-default, the US senate approved a sweeping package that will cut trillions from the deficit and raise the debt limit. Legislation will allow the US’s borrowing limit to increase by at least $2 trillion, preventing the looming cash shortage and covering spending demands until 2013, in addition a first phase of cuts will reduce spending by $1 trillion over 10 years and a second phase to reduce spending will be identified for another $1.5 trillion. This compromise debt-bill will help the US to avoid default and avoid raising taxes, but will significantly cut spending.
So, for where these cuts in spending will be made? By late November, the congressional committee will decide on where those reductions will be made. Some source new revenues through overhauling the tax code, or cuts made to programs such as Medicare, Medicaid and Social Security.
But details of the debt-ceiling deal means that some programs must be kept off the table in the negotiations of cutting spending – including Medicaid, Social Security, Military Salaries, and Veteran’s benefits. Although there is some protection over programs, the anxiousness and tension is still looming. As many as 70 million Social Security checks are issued to Americans every month, many of whom depend on their checks to make ends meet.
For the people who receive Social Security the last few weeks have been extremely nerve-wracking. Unfortunately this stress will not ease any time soon. Steve Troutman of Troutman Law represents many of these same people with their social security claims had this to say, “I am pleased that Congress and the President were finally able to reach an agreement on the debt ceiling issue. However, I remain concerned that the issue has simply been postponed until next year’s elections. We need to all pressure our leaders in Washington to act responsibly and to stop playing political games with issues that so dramatically affect the lives of so many people.”
There is little in the debt deal to promote economic growth, while some measures to stimulate the economy will expire soon – for example, a 2 percentage-point cut in the Social Security tax will mean a majority of households receiving up to $1000-$2000 for spending could expire after this year. Obama is seeking to extend the Social Security tax cut, but it could prove difficult in the second phase of spending cuts.