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POLICY INSIGHT
BEYOND THE NUMBERS

Corker-McCaskill Spending Cap Would Put Veterans’ Programs on Chopping Block

The federal spending cap that Senators Corker and McCaskill have proposed wouldn’t just force massive cuts in Social Security, Medicare, and Medicaid.  It also could devastate programs that serve the nation’s veterans. The proposal would impose automatic, across-the-board cuts in any year that Congress failed to keep projected spending below a cap, eventually set at 20.6 percent of GDP.  Those automatic cuts would reduce mandatory programs — a part of the budget that includes veterans’ compensation, pensions, and education benefits — by nearly one-fifth by 2021. Under current law, spending for these veterans’ programs will be $86 billion in 2021, according to the Congressional Budget Office, so a one-fifth cut would amount to $16 billion.  Over the nine years from 2013 through 2021, the cuts in these programs would total almost $100 billion if made through the automatic mechanism (see table).
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The Corker-McCaskill proposal would have smaller — but hardly trivial — effects on veterans’ programs on the discretionary side of the budget, which consist mostly of veterans’ medical care.  The cuts in these programs would total about $2 billion in 2021 (out of CBO’s baseline of $75 billion in that year), and almost $5 billion over 2013-2021 if made through the automatic mechanism. Moreover, these figures are based on CBO’s projections of discretionary spending under standard baseline rules, which don’t account for the rising costs that the veterans’ health system will face from the aging of the baby-boom population (including many Vietnam veterans), the growing number of wounded Iraq and Afghanistan veterans, and the amount by which health care costs outpace overall inflation.  CBO estimated recently that its standard projections underestimate potential health-care costs for veterans by 45 percent to 75 percent by 2020.  Spending caps like Corker-McCaskill would make it exceedingly difficult for veterans’ health programs to obtain the funding they will need.