Supercommittee cuts will affect Michigan residents

5:06 PM, Nov 16, 2011   |    comments
Congressional Debt-Reduction Supercommittee
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WASHINGTON, D.C. (By Maureen Groppe & Deirdre Shesgreen, Gannett Washington Bureau) - Michigan seniors may see smaller increases in their Social Security checks. Retirees could have to wait longer to get on Medicare. Hospitals and health centers could see their federal funding shrink, forcing them to shed jobs or even shutter facilities.

Those are just a few of the possible outcomes if the congressional "supercommittee," formally called the Joint Select Committee on Deficit Reduction, reaches a deal to trim at least $1.2 trillion from the federal deficit over the next 10 years. If that panel fails to come to an agreement before its Nov. 23 deadline, that will be painful for Michiganders too -- perhaps even more so.

Deadlock by the committee would trigger automatic across-the-board spending cuts to a huge swath of federal programs -- from food safety and highway maintenance to border patrol and military programs. The automatic cuts could mean fewer Pentagon contracts flowing to General Dynamics Corp., Kellogg Co., and Peckham Vocational Industries Inc. It could mean more delays at Lansing's Capital Region Airport or at the Kalamazoo/Battle Creek International Airport, due to fewer air traffic controllers. It could mean fewer border control agents on the southern border or no agents on the northern border.

"There's almost an invisible daily impact of federal spending on how people live their lives, everything from the weather to locking criminals up to whether the bite of a hamburger you're eating is safe," said David Kendall, a senior fellow for health and fiscal policy at Third Way, a centrist Democratic think tank in Washington, D.C., that did an analysis of 10 real-world ramifications of the automatic cuts.

Imprecise or outdated weather forecasts was one item on Third Way's list. Kendall notes that the federal government foots the bill for weather satellites over the polar caps. And if the current ones aren't replaced, weather forecasts will become much less accurate.

"This is a serious matter when we're trying to predict hurricanes and tornadoes and other events that require evacuations," he said. "Despite all the grumbling about the federal government overspending, most of the time the government is doing things that provide a daily benefit for people."

In short, no matter how the super committee's deliberations turn out -- small deal, big one, or none at all -- the impact will be felt in Michigan and across the country.

"If there are Medicaid cuts, it's going to severely cut our operations to the point of maybe having to close some health centers," said Robin Turner, chair of the Community Health Center Board for the Ingham County Health Department, which oversees seven centers. "There are people waiting to get in right now."

Turner is among the Michiganders who are trying to make their concerns known. County health officials collected signatures and personally written postcards from patients that they delivered to federal lawmakers.

"The grassroots movement of people voicing their concern is the most powerful voice that we have," Turner said. "Maybe it's easy to sort of forget when you're sitting in Washington, sitting at a table for 10 hours trying to decide what to cut. This helps to bring a voice and some reason and some compassion to the table."

The Michigan branch of AARP likewise has been sounding the alarm about possible changes to Medicare and Social Security. Michigan AARP rented a van emblazoned with "protect seniors" signs that it drove around the state this summer and it's run print and radio ads. Some of the print ads were directed at the two Michigan lawmakers who serve on the supercommittee, GOP Reps. Dave Camp of Midland and Fred Upton of St. Joseph.

"Don't let them deal away your retirement," one of the radio ads said. "Join AARP's fight to stop cuts to Social Security and Medicare."

One of the proposals reportedly being discussed by the supercommittee is to use a less-generous index to calculate inflationary increases in Social Security benefits. That would mean elderly Michiganders would see the buying power of their government retirement checks -- which average $1,177 a month -- shrink relative to the cost of food, medicine, and other items.

According to calculations by Third Way, that change would mean $4 per month less for seniors earning $15,000 in annual Social Security benefits, in their first year of eligibility. The impact would increase over time, eventually costing more than $1,000 in lost benefits annually.

Kendall, with the Third Way, said that's a small price to pay for a huge savings. If applied to Social Security and other programs, that altered index would help the supercommittee reach almost 20 percent of its $1.2 trillion in targeted savings.

But the national AARP said it has collected more than 6.5 million petitions urging Congress not to cut Social Security and Medicare benefits for deficit reduction.

The United Auto Workers are concerned that the Medicare changes could include raising the eligibility age from 65 to 67. If retirees have to wait longer to get on Medicare, the UAW argues its retiree health care trust won't have enough money to fully cover health care for its approximately 800,000 beneficiaries. About 350,000 of those beneficiaries are in Michigan.

But the American Hospital Association hopes that lawmakers will consider raising the Medicare eligibility age before it cuts Medicare and Medicaid payments to hospitals.

"Our first and foremost point is that hospitals already have contributed to savings," said Laura Appel, vice president for federal policy and advocacy for the Michigan Health & Hospital Association.

Appel said Michigan's hospitals are already going to be getting nearly $1.7 billion less from the federal government over 10 years because of changes made in the 2010 law that overhauled health care.

If the supercommittee can't agree on a deficit-reduction package, then the automatic cuts that would kick in in 2013 would cut Medicare payments to hospitals by as much as 2 percent. Appel said that would mean a loss to Michigan hospitals of more than $1.5 billion

"To ask for further cuts from this particular segment is very difficult," she said. "Everybody is in this together. We all have to find savings. But already being on the hook for $1.7 billion over 10 years seems like a lot."

Much of the most intense lobbying has been around the costs of Medicare, Medicaid and Social Security because that's where a large chunk of the budget goes.

Those programs, along with interest on the debt, consume 78 cents of every $1 the government collects in taxes. Without changes, that could increase to 93 cents within 10 years.

In Michigan, Social Security, Medicare and Medicaid are the largest sources of the nearly $91 billion in federal funding that Michigan received in 2010, according to the U.S. Census Bureau, which annually breaks down federal funding to the state and county level.

The next largest source is defense contracts, which are particularly vulnerable if lawmakers fail to reach a deal and automatic cuts kick in. About half the $1.2 trillion in required savings would have to come from defense spending.

General Dynamics, which makes fighting vehicles in southeastern Michigan, was the state's largest defense contractor in 2010, according to the federal database USAspending.Gov. Battle Creek-based Kellogg, which sells cereals, snacks and frozen foods to the Pentagon, ranked second. Lansing-based Peckham Vocational Industries Inc., ranked third.

Kellogg spokeswoman Kris Charles said the company can't speculate on what would happen to its contracts under various deficit-reduction outcomes. But, Charles said Kellogg hopes "our foods will continue to be enjoyed on military bases worldwide."

Jo Sinha, corporate vice president for Peckham, said her private, non-profit agency is concerned about what might budget cuts could mean for its employees. The Pentagon is the largest client for the agency, whose mission is to create job opportunities for the disabled. It's boosted by a federal set-aside program for contract items that can be produced by organizations like Peckham's. But contracts for the long underwear, fleece jackets and other clothing items made by Peckham for the military have already declined. Peckham, which employees about 2,600 people, has about 250 fewer jobs than last year. If defense spending is sharply cut and human service programs are also cut, Peckham's employees would be hit twice

"I just really hope they all understand if Congress fails to act," Sinha said, "that we're pretty worried that this is a double whammy."

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Contact Maureen Groppe at mgroppe@gannett.com

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