Failure is an option – by Pete Kasperowicz

“The times were dark. The government of the greatest country the world had ever seen teetered on the brink of bankruptcy, threatening a worldwide economic disaster.

But brave men and women stepped forward. Surrounded by all the warning signs of excessive government debt, they formed what was soon nicknamed the “supercommittee,” 12 members of Congress who would come together and find a way forward on a lasting, fiscal solution.

The group met a few times, admitted defeat a few days before their deadline, and left for Thanksgiving…”

It wasn’t exactly a storybook ending. When you name things “super,” you expect some sort of extraordinary result.

But if the “supercommittee” failed, what hope do we have for the “regularcommittee,” that normal group of members responsible for putting together a budget?

Not much hope at all. In fact, the situation now appears to favor the Democrats, who want higher taxes and want all significant cuts to fall on the Defense Department.

How did we get here? The fight over whether and how to raise the debt ceiling resulted in the Budget Control Act, which called on the supercommittee to find at least $1.2 trillion in deficit savings over the next decade. Failure would trigger a $1.2 trillion “sequestration” — cuts to planned spending over the next decade that were supposed to hurt both parties by cutting programs supported by both parties.

So the supercommittee failed, which triggered sequestration. Roughly half of the $1.2 trillion must come from defense, and roughly half must come from programs like Medicare and Medicaid.

The romantics among us like to call these “cuts,” but the $1.2 trillion in deficit reduction does not have to be actual cuts. If it happens at all, most of it will be reductions to the rate of spending growth over the next decade.

Even worse, Sen. Jeff Sessions (R-Ala.), the highest ranking Republican on the Budget Committee, has found what looks like a flaw in the sequestration plan. Sessions argues that while defense is a large portion of the budget, about one-sixth of the government, it will shoulder about half of the required $1.2 trillion in spending reductions.

He further notes that programs like Medicare, Medicaid, Social Security and income support programs like unemployment insurance would be almost untouched by sequestration, as compared to President Obama’s spending proposal and the Congressional Budget Office baseline for the next decade.
Defense spending, in contrast, would increase just 2 to 5 percent over the next decade, which he argues could well be under the rate of inflation.

Yes, it’s still spending growth at a time when maybe we should just chop every agency’s budget by 30 percent for starters. But Sessions has a fair point — why use sequestration to essentially level-fund defense spending, and allow others to enjoy excessive growth (such as Medicare, which would grow 112 percent over the decade even under sequestration)?

Republicans are already pushing for a way to change the sequestration process so it does not hit defense as hard. But that makes the Republicans weak, since asking for a change will necessarily give Democrats leverage.

With that leverage, Democrats are likely to demand tax hikes, and may even demand that tax hikes (they’ll call them “investments”) be used to find some of the $1.2 trillion in deficit savings.

This is not intuition. Some Democrats have cleverly begun to point out that the expiration of the Bush-era tax cuts in 2012 would likely give the U.S. far more than the $1.2 trillion in deficit reduction over the next decade (some estimate $4 trillion in deficit savings).

Rep. Peter DeFazio (D-Ore.), a rare Democrat who supports a balanced budget amendment to the Constitution, calls it the “do nothing” option.

“So what happens if we do nothing?” he asked on November 15. “Well, first you get the sequestration. There’s much gnashing of teeth about that. But Congress will have discretion within accounts, within the Defense Department and elsewhere to find those cuts, which would be relatively modest over a 10-year period. But then the better thing with the do-nothing option is if Congress really, really can do nothing and continues to do nothing for the rest of this session, then all the Bush tax cuts go away and that means $4 trillion of additional revenues with a little bit of shared sacrifice.”

Unfortunately for Republicans, “do nothing” is something that Congress can just barely manage.

And so, a tax hike is coming. Barring some unforeseen voter anger in 2012 over issues such as, say, tax hikes and expanding government debt.

Pete Kasperowicz
Floor Action Blog, The Hill

© Copyright 2011 Tanna K, All rights Reserved. Written For: Tinytown Unleashed

  1 comment for “Failure is an option – by Pete Kasperowicz

  1. January 8, 2012 at 4:55 am

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