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Obama signs debt bill but new battles loom

WASHINGTON — Congress and President Barack Obama beat the deadline for raising the nation's debt ceiling by just a few hours Tuesday, but they hardly ended the clash over the size and reach of government. The next confrontation promises to be at least as contentious as the one they just finished.

Congressional leaders have two weeks to name members of a special 12-member legislative panel that must find ways to cut the government's budget deficit by as much as $1.5 trillion. That number can be reached by reductions in spending and increases in revenues, and the brawl over how to do that has begun.

"We've had too much talk (from) Republican leaders in the Senate saying there will be no revenue. That's not going to happen," said Senate Majority Leader Harry Reid, D-Nev. "The only way we can arrive at a fair arrangement for the American people with this joint committee is to have equal sharing."

Republicans signaled that they have a different view, and it doesn't include higher taxes.

"The answer to this is not giving the government more money to spend," said Sen. Orrin Hatch of Utah, the top Republican on the Senate Finance Committee.

The Senate ended the latest phase of the budget battle Tuesday by voting 74-26 to increase the $14.3 trillion debt limit and to cut federal spending by trillions. The first reductions are aimed at reducing federal deficits by $917 billion over the next decade.

If the 12-member legislative committee can't reach a deal by Nov. 23 that Congress will approve, half the automatic cuts would come from the defense budget and half from other domestic programs, such as education, housing and transportation. But major portions of the federal budget would remain off-limits to the automatic cuts, including Social Security, Medicaid, military and civilian federal pensions, and most low-income programs.

Here's how the second round of cuts could play out.

Medicare

If there's no plan for cuts by the end of the year, the compromise requires the federal government to impose a 2 percent across-the-board reduction in payments to Medicare providers starting in 2013.

Those reductions could end up hurting some of the neediest seniors as the federal cuts take a disproportionate toll on family physicians with many elderly patients and on hospitals that serve them.

The Obama administration and its Democratic allies have billed the Medicare trigger as a relatively benign way to control federal health care spending by forcing the health care industry to find the savings. That approach has usually shielded seniors from big jumps in co-pays and deductibles. It was used most recently in the health care law enacted last year.

Despite cries from hospitals, doctors and other medical providers and warnings that they would stop accepting Medicare, most have adapted to the changes and continue to serve Medicare patients.

But the landscape has always been more challenging for hospitals and primary care doctors that serve large numbers of Medicare and Medicaid patients.

Without as many privately insured patients who typically pay more than Medicare, these providers are more sensitive to Medicare cutbacks. Their disappearance would likely deprive seniors and other Medicare beneficiaries of vital medical care.

"If there is a 2 percent reduction, it will put unbelievable stress on our business," said Michael Rembis, CEO of Hollywood Presbyterian Medical Center in Los Angeles, a hospital that serves primarily Medicare and Medicaid patients in a poor part of the city.

"Something has to break," he said, noting that costs for labor, supplies and drugs continue to go up. "If I can't make revenues to pay for cost increases . . . how does a hospital continue to provide quality care?"

Defense spending

The Pentagon is potentially facing cuts of $850 billion, including $500 billion if the trigger is tripped.

Pro-defense lawmakers in both parties and the White House are signaling that they will resist such deep cuts.

"There is no scenario in the second phase of this proposal that does not turn a debt crisis into a national security crisis," said House Armed Service Committee Chairman Howard "Buck" McKeon, R-Calif..

But Gordon Adams, who oversaw the defense budget in the Clinton administration, said pressure to reduce the deficit will force cuts of $1 trillion or more over the next decade, especially with U.S. drawdown in Iraq and waning public support for the Afghan war.

"By 2021, it will still be a very capable military, but we will look back and see that a trillion dollars has come out of the Defense Department," Adams said.

Money to the states

With federal dollars accounting for a third of state revenues, analysts said steep cuts would be unavoidable.

"The debt-limit deal inevitably will lead to large federal cuts in programs for state and local governments," said Nicholas Johnson, vice president for state fiscal policy at the Center on Budget and Policy Priorities.

Medicaid, the joint federal-state health care program for the poor and disabled, represents by far the largest source of federal aid to states. It is protected from the automatic triggers, but many analysts are concerned that the 12-member panel could look for cuts in federal funding for the program.

"They might be looking at Medicaid in the second round of cuts," said Brian Sigritz, director of state fiscal studies at the National Association of State Budget Officers. "Transportation and infrastructure programs also could be cut back."

Information from the Washington Post, Bloomberg and McClatchy-Tribune was included in this report.

74-26

Senate vote

President Obama signed the bill in the Oval Office soon after the vote. "Growing the economy isn't just about cutting spending," he said.

Florida's senators

Democrat Bill Nelson found a lot to like in the bill; Republican Marco Rubio says it isn't enough. 8A

Obama signs debt bill but new battles loom 08/03/11 [Last modified: Wednesday, August 3, 2011 12:22am]

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