I'm sure by now you have heard of the so called "super committee" -- the Debt Panel set up earlier in the year after the horrible debt ceiling debate over the summer. It was the result of the Budget Control Act of 2011
. We, as a nation saw our debt ceiling increased -- in return for more deficit reduction plans. The result? The 'Super Committee"
For a little background
Under the deal President Obama signed on Tuesday, the top four Republican and Democratic leaders in Congress will each appoint three members to a special committee that must recommend by November 23 at least $1.5 trillion in additional deficit reduction through 2021. If a majority of committee members endorse a proposal, that plan is guaranteed a floor vote in both chambers by December 23 without amendment or Senate filibuster.
Those rules provide this group with vastly more leverage to stabilize the nation’s finances than any previous commission has possessed. The procedures effectively preempt a minority veto—either through the Senate filibuster or the informal House rule that legislation reaches the floor only if a “majority of the majority” party supports it. Because a majority proposal from the committee could be passed with any combination of Republican and Democratic votes, it provides a unique opportunity for the center of both parties to impose a balanced solution on the ideological vanguard of left and right.
Now, I am going to ask for your reading patience here today.
You will recall that a failure for the super committee to come to a (simple) majority consensus would cause a trigger
* Crucially, Obama will vow to veto any entitlement cuts if revenue increases are not part of the solution.
That last one is key — a veto threat is a line the White House was unwilling to draw during the fall of 2010, when the battle over extending the Bush tax cuts was in full swing.
You will recall that in lieu of this trigger the President offered his own ideas to cut the deficit
. From Think Progress:
What’s in it?
Well, $1.5 trillion of it is higher taxes. About half of that is the expiration of the “rich people only” portion of the Bush tax cuts. The rest comes from closing loopholes and for the proposed new millionaire’s minimum tax so that high-income individuals won’t be paying lower marginal rates than the middle class.
Then you have about $1 trillion in war savings as the fighting winds down in Iraq and Afghanistan.
Last, you have the domestic spending element. That includes changes worth $248 billion to Medicare and $72 billion to Medicaid which the administration is promising fall on providers rather than patients and don’t involve any deep changes to the basic nature of the programs... There are also some other domestic spending cuts, worth about $200 billion...
the “other” cuts, which are as follows:
— $33 billion from agriculture subsidies.
— $42.5 billion from Federal employee retirement benefits, on both the civilian and military side.
— $4.1 billion from the disposal of unused government assets.
— $92.2 billion from restructuring government operations and reducing government liabilities.
— $77.6 billion from improving Federal program management and reducing waste and abuse.
Today is November 21. The Debt Panel was supposed to make a recommendation by the 23rd. Keep in mind that any recommendation must go to the Congressional Budget office for review.
The Budget Control Act increased the debt ceiling by $400 billion in August 2011. Concurrently, it requires the federal government to make $917 billion in spending cuts over a ten-year period as a first installment, in keeping with estimates from the Congressional Budget Office that assume that the current laws will stay the same, including the expiration of the Bush tax cuts from 2001 and 2003 that were extended for two years in 2010. Under the plan, government revenues are projected to rise after 2012.
That is unlikely to happen if they do not come up with something today. At that point, the CBO gets a day and if everything is perfect, we could meet the deadline. It's not looking very likely. Almost 4 months later, there is no agreement. So what is the fallout from a super committee failure? Well, according to this Reuters analysis,
financially, not too bad. Most of it seems political.
* Increased investor uncertainty. Investors already have little confidence Republicans and Democrats can bridge a yawning ideological divide over tax policy and who should shoulder the burden for reducing deficits. The U.S. Congress has had trouble passing even routine legislation this year, leading to repeated disruptions of government services.
* The committee's failure is unlikely to trigger another downgrade of the U.S. credit rating. Rating agencies have said they will look at a range of factors in making any decision but that the committee's washout will not be decisive.
* Republicans are already making noises about altering the $1.2 trillion in automatic spending cuts, or sequesters, that are due to kick in 2013 as a result of the super committee's failure. They want to soften the planned $600 billion defense cuts. If Congress starts tinkering with the sequesters, however, financial markets could become unnerved by the unraveling of savings seen as already "in the bank." Again, the 2012 elections could determine the fate of these cuts.
* Democrats and Republicans will try to use the super committee's dead end for political gain. Democrats will say the outcome is further evidence Republicans just want to protect the rich from sharing the burden of deficit reduction. Republicans will argue that, once again, Democrats fail to grasp the gravity of escalating costs of healthcare benefits.
* The White House had been bracing for days for the committee's failure and believes President Barack Obama can weather it without major political fallout and may even be able to score points against Republicans as he seeks re-election.
So yes, that means the Republicans (Via Ron Paul) will try to remove the "trigger
If the committee charged with reducing the federal deficit fails to put forward a viable plan, Rep. Ron Paul says Congress won't allow the resulting automatic budget cuts to proceed.
The reason? The cuts threaten the military budget.
"The sentiment is very strong, both right and left," he said this morning at an event sponsored by the libertarian Cato Institute. "They're obsessed with militarism; they're obsessed with more wars; they're obsessed with our foreign policy."
I thought this was about reducing spending and cutting the deficit? I could be wrong here, but it appears the trigger is the following
If the committee fails to agree on a package or the full Congress fails to pass it, a so-called "trigger mechanism" would enact $1.2 trillion in automatic spending cuts to serve as the second installment of deficit reduction measures.These cuts would be split between the national security and domestic arenas, but the biggest entitlement programs would be excluded from these automatic cuts.
Go back and look at what the trigger is. It's actually pretty much what the President wanted all along. He is willing to make cuts all over the place. The GOP is balking at cutting defense spending (and of course -- raising taxes for the rich)
Interesting. Maybe this was all smoke and mirrors all along. Sorry for all the wonk, today.
And as an added bonus, let me make this all as clear and concise as Greg Sargent does from his column in WaPo: No, `both sides’ aren’t equally to blame for supercommittee failure
And so: Any news outlet that doesn’t leave readers and viewers with an absolutely clear sense that the primary sticking point was over whether the rich should see their contribution to deficit reduction increase or decrease is letting down its customers.
We don't have customers here at our blog -- that said, I hope I have not let our readers down.