Policy Priorities

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August 2, 2011

Debt Deal Prevents Default – What It Means for Children

Last night, after months of intense negotiations surrounding how to raise the debt ceiling and reduce the deficit, the House of Representatives passed "The Budget Control Act of 2011" by a vote of 269 to 161. The Senate is expected to follow suit today with a vote scheduled for noon. The two-step, $2.4 trillion deficit reduction package will then head to President Obama for his signature later today -- the day the nation would have defaulted on its financial obligations had lawmakers been unable to come to an agreement to raise the debt ceiling.

The work to ensure children and families are protected from deep cuts will continue in the coming months as Congress develops recommendations for further cuts to meet the parameters of the deal that passed this morning. Learn more about the Budget Control Act of 2011 below and stay tuned to Children’s Budget Watch to see the process unfold.

 August 1, 2011


After a very long weekend of negotiations, the White House and congressional leadership came to an agreement late last night on a deal to raise the debt ceiling and enact long term deficit reduction. Just a day before the federal government would have defaulted, a two-part plan known as the “Budget Control Act of 2011” is awaiting official approval by the House and Senate.

The Budget Control Act of 2011:

  • Raises the debt ceiling by about $2.1 trillion in a series of steps that will allow the nation to continue to borrow until early 2013; 
  • Caps discretionary spending – defense and non-defense equally – for 10 years. Total discretionary spending in FY 2012 would be reduced by $7 billion compared to current levels and in FY 2013 by $3 billion. This equates to as-of-yet unspecified spending cuts of nearly $1 trillion that could have a dire effect on programs such as the Maternal and Child Health Block Grant, child health immunization grants, the Children’s Hospitals Graduate Medical Education Program and many critical education and social services programs; Pell Grants are protected at least in part from these cuts; 
  • Creates a bipartisan Committee composed of six Republicans and six Democrats, three from each chamber of Congress, to identify an additional $1.5 trillion in deficit reduction by this Thanksgiving. The Committee is empowered to make recommendations in all areas, including tax reform and cuts to entitlement programs like Medicaid, CHIP, Medicare, SNAP/food stamps, and Social Security. After its recommendations are presented to Congress (by November 23, 2011), Congress must vote up or down on the recommendations by December 23, 2011. If the Committee does not come to agreement or Congress does not approve the Committee’s recommendations, automatic spending cuts will go into effect (see next bullet). 
  • Includes a trigger mechanism through which automatic across the board cuts will be made if the Committee or Congress cannot approve an agreement on deficit reduction of at least $1.2 trillion over 10 years, by December 23, 2011. These automatic cuts would begin on January 1, 2013, and be split evenly between domestic and defense spending. Programs serving low-income and vulnerable children and families – including Medicaid, CHIP, Pell Grants, WIC, SNAP/food stamps and Social Security – would be exempt from these across the board cuts; and 
  • Requires a vote on a balanced budget amendment before the end of the year. The plan does not make the debt limit increase contingent upon passage of the amendment or prevent a vote on alternative versions of the balanced budget amendment.

The bill now goes to the House and Senate for approval where a vote is expected early this evening in the House with the Senate following suit soon thereafter.

We are continuing our analysis of the impact this deal will have on children and families and will report back soon. Stay tuned to Children’s Budget Watch for more…

Click here to view past Budget Watch updates.