Failure of supercommittee starts the blame game
Last week, to no one’s real surprise, the Congressional “supercommittee” announced that it had failed to agree on spending cuts and tax hikes which were to total a targeted amount of $1.5 trillion dollars. After three months of negotiations, this group of six Democrats and six Republicans from the House and Senate couldn’t agree upon a combination in spending cuts and tax hikes to circumvent automatic draconian cuts to federal spending beginning in 2013. Republicans held fast to their pledge to reduce the deficit by making major spending cuts without increasing taxes. Democrats insisted upon significant tax increases for wealthier Americans and were less concerned about spending cuts. As neither side would blink, the failure of the effort was mutually assured.
The supercommittee grew out of the summer congressional drama that surrounded the vote to raise the federal debt limit. After months of stalemate between the president, who wanted a stand alone bill increasing the debt ceiling, and the Republican members of Congress, who insisted on tying huge spending cuts to an agreement to raise the debt ceiling, there was fear that the U.S. would default on its debt and that massive government lay-offs were in the offing. Along with the fear of default, the administration warned that the U.S. credit rating might be downgraded if we failed to raise the debt limit. With a deadline looming in early August an agreement was reached where the president was given the increased debt ceiling in exchange for an agreement by congress to cut the deficit by $1.5 trillion dollars. Despite the agreement, Standard & Poor’s credit rating agency downgraded the long-term credit rating of the U.S. government for the first time in its history, from AAA to AA+.
The details of how to achieve the deficit reduction were to be worked out by the Joint Select Committee on Deficit Reduction, known as the supercommittee. The agreement specified an incentive for Congress to act. If Congress failed to produce a deficit reduction bill with at least $1.2 trillion in cuts, then Congress could grant an additional $1.2 trillion increase in the debt ceiling. This would trigger across-the-board cuts (“sequestration”) of spending, equally split between defense and non-defense programs. The cuts would apply to mandatory and discretionary spending in the years 2013 to 2021. The cuts would be an amount equal to the difference between $1.2 trillion and the amount of deficit reduction enacted from the joint committee. Since the supercommittee came out with zero deficit reduction, the amount of the sequestration will be $1.2 trillion.
The failed budget negotiations may not be the end of the deficit battles. The prospect of an additional $600 billion in defense cuts concerns many Republicans and some Democrats, including Obama’s outspoken Secretary of Defense. They are looking for a way to revisit the amount of defense cuts. Those cuts could impact us here in the Miami Valley as Wright-Patterson Air Force Base will certainly be affected. But the majority of congressional Democrats prefer sequestration to the alternatives, and Obama has strongly suggested that he will veto any attempt to unravel the automatic cuts.
Even before the supercommittee announced its failure to reach an agreement, the blame game between congressional Republicans and Democrats had already begun. Democrats were quick to point out that Republicans opposed tax increases for even the very wealthy Americans who could easily afford to pay more. Republicans point out that to achieve the $1.5 trillion in deficit reduction, the Democrat starting point was $1 trillion in new taxes which will impact all Americans, not only those with incomes of over $200,000. President Obama’s somewhat muted participation has led to speculation that he is just as happy with the failure of the supercommittee. With the presidential election already in high gear, it seems unlikely that a compromise is anywhere near.
Forum Question of the Week:
Was the supercommittee doomed to fail from the beginning? Who is more responsible for the failure — Republicans or Democrats?