Monday, November 21, 2011

Not So Super After All

But we already knew that:
Almost no one had high or even medium hopes for the congressional super committee on deficit reduction. The 12-member committee was established earlier this year as part of the deal to raise the debt ceiling; six Democrats, six Republicans, three each from the House and Senate. Their task: Come up with at least $1.2 trillion in budget savings (over, ahem, 10 years). Failing a deal by Thanksgiving, automatic across-the-board cuts would take effect. With a federal budget approaching $4 trillion every year, this task seemed neither tall nor especially consequential. Yet politics is as politics does, and the committee's efforts have all but collapsed.

This failure comes despite major Republican concessions. Long insisting on no tax increases, Republicans offered a plan that would eliminate or cap many deductions while lowering rates. The top individual rate would fall from 35 percent to 28 percent, and the corporate rate would drop from 35 percent to 25 percent. Static scoring says these changes would combine for $500 billion in additional revenue, and the benefit would be flattened rates and simplified returns. The last time it was done, the result was solid economic growth.

The tax proposal requires that cuts would need to total just $750 billion over 10 years to achieve the committee's stated goal. Democrats, however, continued to refuse any deal that would involve lower tax rates, or less than $1 trillion in additional tax revenue. In fact, they still insist that tax rates go up, not down. On top of that, they want to use savings from the wars in Iraq and Afghanistan winding down to boost "stimulus" spending.

Still, why are Democrats suddenly unwilling to take these big concessions? After all, as The Wall Street Journal explains, "[T]he deal ... would be a big political win for all concerned. It would give the economy a major lift by taking the tax increase now scheduled for 2013 off the table, and it would show that Congress could at least make some progress toward controlling federal spending. With a ratio of $1.50 in spending cuts to $1 in tax increases, the offer is far better for Democrats than the $3 to $1 ratio that President Obama's own Simpson-Bowles deficit commission recommended."
We think the reasons for the Democrats' actions are actually pretty obvious. First, they need someone and something to demagogue. They can't budge on sticking it to the rich, and lower rates would be seen by their Flea Party minions as a cave. Second, Barack Obama is desperate to campaign against a "do-nothing" Congress, but he can't do that if Congress actually does something. Obviously, he will still try to blame Republicans for obstruction, and a large part of the electorate will fall for it.
Hm, it looks like that's precisely what is playing out now:
With the Washington Post reporting – and Senator Jon Kyl confirming – that there’s a general sense of malaise surrounding budget deal negotiations, the end may be in sight. Unfortunately, the light at the end of the tunnel is looking more and more like it’s the headlight of an oncoming train.
The congressional committee tasked with reducing the federal deficit is poised to admit defeat as soon as Monday, and its unfinished business will set up a year-end battle over emergency jobless benefits and an expiring payroll tax holiday.
Those provisions are among a host of measures set to lapse at the end of December. During nearly three months of negotiations, the “supercommittee” had been weighing whether to extend at least some of them as part of a broader plan to shave a minimum of $1.2 trillion over the next decade.
The mere fact of failure, should it occur, probably won’t come as a shock to most observers. (Our friends at Outside the Beltway, in fact, rather blandly call it “An Unsurprising Failure.”) But from all of these interviews and a sampling of the talking heads this weekend, what was more startling to me was an indication that a lot of these folks really never wanted the committee to succeed in the first place. But why? A few observations follow.

From the Left side of the aisle, there does seem to be one possible answer which led me to one of those forehead slapping, “I coulda’ had a V-8″ moments. I was watching a panel of entirely left wing pundits on MSNBC this morning, two of whom came out without prevarication and said they were openly hoping the group would fail to meet the deadline. The reason? Because then the sequestration would kick in and it leaves entitlement programs essentially untouched while making deep cuts in the military. And as one noted, such cuts to the military are, “long overdue.” Further, they pointed out that failure would result in the end of the Bush era tax cuts which, as one of them put it, “would solve most of our problems right there.”

I’ve long since gotten over being shocked at hearing things like this, and in some ways it was rather refreshing to hear it stated so openly and honestly. Of course, it’s also disastrously wrong as far as I can tell, but at least it’s honest.

But there have been plenty on the Right who have adopted a hang dog attitude about the work the committee is attempting as well. The general consensus seems to be that if there were to be a deal, in order to get any of the Democrats on board it was going to involve massive tax increases. Better to give up and head to sequester rather than give in on that, goes this line of thinking.

But was the entire thing a dog and pony show with no real effect except for 2012 political positioning? The other chatter, including some of the comments from John Kerry, is that none of the threatened “draconian cuts” from the original deal will happen anyway. Remember… they don’t take place until 2013. And at least according to some, that gives Congress an entire year to get together and repeal that decision. And if that happens, you may wind up with tax cuts expiring, no measurable cuts in spending, and no significant change in course in terms of basic government theory. Game.. set.. match.

So.. was this all just for show?
Well, yeah.  These are elected politicians, after all.  Sadly, even those on our side seem to be more concerned with their own political power and positions than the economic future of our nation's children and grandchildren.

Hey, you don't earn a single-digit approval by being honorable or standing on principle, you know.

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