National debt ceiling raised; federal spending cut

From the National Council of Nonprofits

President Obama and Congressional leaders reached agreement on a $2 trillion deal to raise the federal borrowing limit and cut spending. The legislation, signed by the President on August 2, immediately cuts discretionary spending by $900 billion over ten years, and raises the debt ceiling in two steps, each time allowing Congress to vote to disapprove the increases (but those votes would be subject to presidential vetoes that are unlikely to be overridden).

The agreement also creates a 12-member bi-partisan, bi-cameral super-committee to determine the details of an additional $1.2 trillion to $1.5 trillion in deficit reduction (which can be in spending cuts, entitlement reforms, and increased taxes). The plan developed by the super-committee will be subject to House and Senate votes without amendments by Dec. 23.

If Congress fails to reduce the deficit by at least $1.2 trillion more, the agreement calls for automatic across-the-board spending cuts: $600 billion from defense programs and $600 billion from domestic programs, with the exception of programs for the poor including Medicaid and Social Security.

Analysis of the debt deal – what it means to nonprofits

No one can predict with any certainty how the forces unleashed by the deficit reduction deal will impact nonprofits and the people they serve, nor, for that matter, how the deal will impact businesses or state and local governments. Here are a few observations to provide some perspective to the coming debates:

> Spending cuts: As the New York Times, Washington Post and Christian Science Monitor report, governments at the state and local levels already are bracing for significantly reduced funding, which, in turn, limits their ability to work with nonprofits to provide services on behalf of governments in communities throughout the country.

> Entitlement Reforms: Since policymakers generally assume nonprofits will fill in the gaps the policymakers create, many of the reforms to Medicaid Medicare, and Social Security are likely to increase demand for services and reduce funding. Proposals on the table range from reducing eligibility and reimbursement rates to delaying and taxing benefits.

> Tax Reforms: There is broad agreement that the tax code is too complicated and unfair, but no consensus exists on whether reforms should be designed primarily to simplify the law and reduce tax rates or to generate increased revenues to reduce the deficit. Lowering the individual tax rates from the current top rate of 36 percent to 25 percent, as discussed in the House, is expected also to lower the incentive for giving, as is the President’s proposal to limit the value of charitable and other itemized deductions. 

Tell the National Council what you think: How will the budget deal affect your ability to accomplish the mission of your nonprofit? How will it affect the people you serve?