Published November 2, 2011
The Joint Select Committee on Deficit Reduction—sometimes called the “super committee” because of the unusual power it was granted in the legislative process—now has just three weeks left before it is to report out a plan to cut at least $1.2 trillion from projected federal budget deficits over the coming decade. If the committee fails to produce such a plan, then nine annual automatic “sequesters” will be triggered, starting in January 2013, to achieve the same targeted level of deficit reduction—$1.2 trillion. The “sequesters” will impose spending cuts in defense and certain non-exempt domestic accounts to hit the deficit reduction target.
Producing a deficit-cutting plan that will head off the automatic sequesters will be a tall order for the super committee. The law requires that seven of the committee’s twelve members sign onto any plan before it can be considered “approved” by the committee (and thus eligible for expedited consideration in the House and Senate). But the committee’s membership is split evenly, with six members from each party; thus, no plan can be approved by the committee unless it has achieved some level of bipartisan support.
In the current environment, that looks like a long shot, especially in view of the president’s rhetoric since Labor Day. In the last two months, he has traveled the country in a campaign-style tour excoriating Republicans, and especially those controlling the House, for being, as the president says, on the side of the rich and against the American middle class. And he has threatened to veto any deficit-cutting plan that does not impose higher tax rates on “the rich”—as he defines them. This isn’t exactly the way to build bipartisan consensus. Indeed, if the super committee fails, no one will be more to blame than President Obama, who clearly prefers at this point to campaign for re-election rather than to pursue a bipartisan deal that might undercut his political message.
But even if the president were pushing for a deal, it would still be a stretch because the parties are simply talking past each other on the most fundamental issues at stake in the budget talks—most especially entitlement reform.
When the committee began its work in August, committee members went out of their way to make it clear that they were going to keep their deliberations private to build trust. That didn’t last very long. Last week, we learned that the Democratic members of the committee had floated a plan to cut $3 trillion from the deficit over a decade, a plan that would seemingly achieve far more in deficit reduction than is required of the super committee. This conveniently leaked “plan” played well in the usual places, as the media trumpeted it as a credible offer.
But was it? It turns out that the Democratic plan isn’t much of a plan at all, but only a series of aggregate promises that would have to be backed up by actual detail later. All we know is that the Democrats promised to raise taxes by about $1.3 trillion over ten years and cut about $475 billion more from Medicare and Medicaid. But how, exactly? That’s where things are a little fuzzy. Apparently, what the Democrats envision is that the super committee would come to an aggregate deal and then let Senate Finance Committee Chairman Max Baucus write the detailed provisions to hit the targets.
Not exactly a process that builds confidence. Indeed, if that really were how things were to proceed, it’s not at all clear why the super committee ever existed.
The problem is not that the two sides can’t put on the table broad budget parameters that look good on paper (although Republicans will never agree to the kind of tax hike the Democrats are now calling for). The problem is that everything breaks down when the negotiations go from broad and general to the specific.
Sure, there’s bipartisan support for broad-based tax reform that lowers rates even as it generates more economic activity. But that’s as far as anybody ever gets because the base-broadening part of the deal will necessarily mean taking on some of the most entrenched deductions and exemptions in the current code, such as the exclusion for employer-paid health insurance, and the deductions for home mortgage interest, state and local taxes, and charitable contributions. Otherwise the promise of lower rates is just a mirage.
And with respect to Medicare and Medicaid, the parties simply have fundamentally different visions for cost-control. The Democrats want to double down on the approach taken in Obamacare, which means more across-the-board payment rate reductions imposed on suppliers of services and products as well as micromanagement by the Medicare bureaucracy. This approach to cost-cutting is basically worse than nothing, as it leaves unreformed the fundamental structures of Medicare and Medicaid which are a big part of the health care cost problem. Republicans are pushing for reforms that would move the programs away from command-and-control and toward market-based competition. But precisely because the Republican approach would move power and authority away from the federal government, the Democrats remain staunchly in support of the status quo (just with lower government payments).
By all accounts, the super committee has made no progress in conquering these large obstacles to a “grand bargain” on the budget.
That being the case, some in Congress are pushing for a smaller, more incremental deal from the committee, to demonstrate to the markets and the ratings agencies that the American political system isn’t entirely broken. Fine, if it can be done. But under no circumstances should a deal which merely tinkers around the edges and does not fundamentally reform the tax code and entitlement programs be billed as anything but a temporary Band-Aid.
In truth, what is really holding back the super committee is that it does not have a mandate from voters to do what needs to be done. That’s going to take another election, in 2012. Only then will it be clear which vision of government—permanently higher taxes to pay for the entitlement status quo, or lower taxes with sensible entitlement reform—has the upper hand. At that point, both sides will be able to calibrate their positions to reflect political reality.
Until then, asking the super committee to fix the problem is simply unrealistic. And there’s really no reason to wring hands over it.
After the election, when the voters have had their say, Congress will still have plenty of time to implement changes that would forestall the need for a 2013 sequester, and to provide room for the president (whoever that might be) to work with the next Congress on a broad budget deal. That will be the moment to address the fundamental questions that must be answered to narrow the long-term gap between revenue and spending. Not now.
James C. Capretta is a fellow at the Ethics and Public Policy Center. He was an associate director at the Office of Management and Budget from 2001 to 2004.