The Not-So-Super Committee on Debt Reduction
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.
Meanwhile, the U.S. national debt will surpass $15 trillion any day now. Given that, and given the looming failure of the super committee to agree to anything resembling even minor budget tweaks, and given Obama's record of profligate spending and deficit expansion, it was hard to believe this Washington Timesheadline wasn't a joke: "[Nicolas] Sarkozy asks Obama to help with debt crisis." That's right -- the French president is looking to his American counterpart to solve the European debt crisis. "We need the leadership of Barack Obama," Sarkozy said. We wonder if Sarkozy is aware that more debt won't fix the problem.
What should the debt committee do?
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