The "Super Committee" Failed – What Now?

The budget "Super Committee" failed to reach any agreement on federal deficit reduction yesterday, missing its deadline and leaving Congress with no clear alternative to the $1.2 trillion in automatic spending cuts slated to take effect January 2, 2013. Members of Congress and the President, however, appear to be setting the stage for continuation of the debate into 2012, leaving federal agencies and contractors with little certainty about how their programs will be affected.

Under the Budget Control Act of 2011 ("BCA"), $1.2 trillion of automatic budget cuts will be implemented through a process of "sequestration" if Congress does not act. The automatic reductions will take the form of equal cuts (in dollar terms) in defense and nondefense spending accounts, starting in fiscal year 2013. Those cuts will be achieved by lowering the caps on discretionary budget authority specified in the BCA and by automatically cancelling budgetary resources for some programs and activities financed by mandatory spending. For a detailed analysis of the sequestration process, click the link to Crowell & Moring's September 2011 webinar below.

Congress still has time to act. Before the automatic spending cuts go into effect, Congress still may reach an agreement on specific budget cuts or may even amend the BCA. Some members of Congress already have suggested increasing the number of programs exempt from sequestration, particularly to reduce the impact of cuts at the Department of Defense. President Obama, however, has indicated that he will veto any such attempt by Congress to rewrite the BCA. It also appears unlikely that either the President or Congress will abandon the requirement for $1.2 trillion in total deficit reduction.

Continuing uncertainty about these budget cuts will mean substantial challenges for planning and procurement by federal agencies in FY 2012. Crowell will continue to monitor the budget process and provide updates as events merit.

Crowell & Moring Webinar: The Deficit Reduction "Super Committee"-- What it Means for Government Contractors and Healthcare Plans and Providers [PDF].