$1.2 Trillion in Cuts Still Avoids Hard Choices

November 15th, 2011 at 3:30 pm | 20 Comments |

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Gloom has descended on the work of the Joint Select Committee on Deficit Reduction (JSC) as the Nov. 23 deadline for its work nears.

As JSC Co-Chair Jeb Hensarling said over the weekend, cheap it has been a roller-coaster ride. Republicans have made offers; Democrats have made offers. Both long-term reform and short-term “kick the canister down the road” proposals have been floated and sunk almost as suddenly as they appeared. A variety of contortions using process and policies emerge and then submerge.

Despite all the sturm und drang, buy a simple fact remains. The JSC is very likely to produce the requisite $1.2 trillion in deficit reduction mandated by the Budget Control Act. Why are we mildly optimistic in the midst of the conventional wisdom of impending doom? Because finding $1.2 trillion off the “right” baseline isn’t really that hard.

Take the net $300 billion in revenues in the last Republican “offer,” add $100 billion each in additional cuts in the out-years for defense and non-defense discretionary spending, pump up the total with fees, minor changes in tax expenditures, a change in the CPI calculation for government programs and tax brackets, put in some cuts in provider payments in Medicare and assume some changes in Medicaid, take the “interest savings” such changes allegedly produce and you get real close to $1.2 trillion.

We suspect that the odds are on such an outcome.

If one notices the story in the Washington Post this morning one sees again the old device of taking credit for a baseline anomaly in defense spending. About $1 trillion in spending for defense operations abroad is in the CBO baseline. It wasn’t ever going to spent for those purposes. Yet, if the JSC decides to “cut” that $1 trillion, CBO will give it credit.

Forecast deficits under the CBO baseline will, indeed, decline by $1 trillion over 10 years. We have never doubted that some or all of those “savings” would be used, both to meet the $1.2 trillion goal of the JSC, but also to offset extension of Unemployment Insurance, “patching” the Alternative Minimum Tax, and incorporating the annual rejection of savings from Medicare providers.

One of the more intriguing questions has always been, will House Republicans support such a plan. After all, the option outlined above changes the national debt trajectory minimally during the next 20 years. The United States will still accumulate another $10 trillion or more in new debt during the next decade, leading to a debt-to-Gross Domestic Product ratio of more than 150 per cent.

What has happened to the “deficit hawks” of the Grand Old Tea Party?

Uniformly, we are told that three things haven’t happened that were forecasted by gloom-and-doomers.

First, nothing bad happened after the so-called debt ceiling debacle of August. Interest rates are lower now than they were then and the Dow Jones Industrial Average is higher.

Second, none of the 12 members of the committee have been hounded by their colleagues, urging them to act broadly or all hell will break loose.

Third, the party caucuses remain far from persuaded that it is in their political interests to tackle anything truly controversial with a very uncertain 2012 election year approaching.

Add to that the fact that most Members of Congress have serious ADHD tendencies, and you can see why anything demanding a view much longer than three months poses difficulties.

In the final analysis, “fiscal fatigue” afflicts Congress. “Enough already” seems the new rallying cry. After the CR mess for FY11, the debt ceiling drama, and another CR mini-soap opera for FY 12, members and staff are exhausted. They see no painless path forward; so, being humans, they choose a different path entirely—spend a lot of time home in your district or state, give rousing speeches and sign letters asking for fiscal sanity, even hold a big rally at the Capitol on Tuesday afternoon, and then vote for a balanced budget amendment to the Constitution. That should be enough cover for 2012 and maybe the economy will pull us out of hard choices in 2013.

We can rail and rant all we want at Congress, but its actions precisely conform to what most American voters want. No cuts to Social Security or Medicare, no tax increases, balanced budgets and more jobs—every poll reveals those preferences. And, under our Constitution, those members of Congress who most accurately reflect the wishes of their constituents who vote get re-elected.

As Cassius told Brutus as the plot to kill Caesar unfolded, “The fault, dear Brutus, is not in our stars/But in ourselves….”

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20 Comments so far ↓

  • ottovbvs

    The Republicans haven’t made any serious offers on the revenue side. Period. Their “offers” have been like the one they made about a week ago. The Democrats agree to a bunch of cuts in programs and at some point in the future the Republicans promise (cross their hearts and hope to die) to look at revenue raising measures. This is one of those offers YOU can refuse.

  • LFC

    What has happened to the “deficit hawks” of the Grand Old Tea Party?

    They haven’t actually existed, at least not in any number, for a very long time.

    We can rail and rant all we want at Congress, but its actions precisely conform to what most American voters want. No cuts to Social Security or Medicare, no tax increases, balanced budgets and more jobs—every poll reveals those preferences.

    This sounds exactly like the Tea Party platform, not the majority view. For example, a majority of people polled not too long ago actually supported tax increases if used for deficit reduction. I think people are willing to entertain reasonable changes (vs. “cuts” which seems to always be the GOP direction anymore) to Social Security and Medicare. I doubt balanced budgets matter to that many folks as long as we’re in the ballpark. Jobs? Well DUH, of course everybody wants more jobs in a Bush Bust economy.

    • Graychin

      The other thing that has silenced the hypocritical deficit hawks is that the Occupy movement has changed the conversation. That, and the recent voter pushback against some of the Republican excesses at the state level.

      They’re hearing footsteps.

      • Fart Carbuncle

        “…the Occupy movement has changed the conversation.”

        Amusing. The only reason that these now ejected hippies got attention was the mainstream media’s hunger for an antidote to their Tea Party nemesis.

        • Graychin

          Blame the messenger if you must. But the conversation HAS changed, even though FrumForum assured us that Occupy wouldn’t last for a week.

      • think4yourself

        @ Graychin: “the Occupy movement has changed the conversation.”

        I think your mixing cause and effect. I think Steve Bell is right on his reasons why this committee is kicking the can down the road and that has little to do with OWS, other than OWS is one more thing to suck up media oxygen. GOP is not offering tax cuts and Dems are offering reductions. Nothing in the OWS movement precludes the Republicans from tax cuts. Rather, they don’t see a political benefit if they do and real political danger if they don’t (primaried by angry no tax TP’ers).

    • dante

      There haven’t been any deficit hawks in the GOP since January 20, 2001. That was the day that “pro growth” replaced “fiscal responsibility”.

  • D Furlano

    A grand waste of time. No matter what the decision the stupid committee comes up with it will only makes things worse. If they plan to cut the deficit or if they raise taxes both will slow an already anemic economy.

    If only we had a president that knew how to lead instead of the pathetic, useless, dunce that takes up space at 1600 Pennsylvania avenue.

    Anyone ever hear from him? Someone should go check becasue I am not sure if he is still breathing.

    • ottovbvs

      “Someone should go check becasue I am not sure if he is still breathing.”

      Another bad case of ODS…this time on the far left. Uncle Obama hasn’t delivered the peoples republic that Furlano so obviously desires hence he’s a pathetic dunce. Obama set up this group to fail, they are duly failing, why should he intervene?

  • Frumplestiltskin

    here is timothy noah on this:
    Oh no! Have you heard? The super committee may not come up with $1.2 trillion in budget cuts by its Nov. 23 deadline! Even after the Republicans on the committee made the extraordinary, nay, unprecedented concession to include taxes in the deficit-reduction package. Their plan would raise $600 billion in revenue. That is, until you factor in extending all the soon-to-expire Bush tax cuts, which is a condition of the deal. When you figure that in their plan “raises” -$3.1 trillion in revenue. Or, if you think it’s unfair to count the parts of the Bush tax cuts that Obama wants to keep, it would “raise” about -$2 trillion in revenue. Oh, and they want to drop the top marginal rate (currently 35 percent and set to rise on Jan. 1 to 38.6 percent) to 28 percent, too. But hey, this is a really big step for them! What’s maintaining a progressive tax code and lowering the long-term budget deficit compared to reassuring skittish Republicans that Grover Norquist puts his trousers on one leg at a time?

    This is only a slight caricature of what the press in general, and the Washington Post in particular, has to say about the super committee negotiations. Yesterday the Post had a hissy fit because the stock market wasn’t trembling at the thought that the super committee might fail. Today the Post’s Neil Irwin and Ylan Q. Mui say, “If the super committee misses its Thanksgiving deadline, the deliberations could cast a cloud over the crucial holiday shopping season, which accounts for as much as 40 percent of sales for some businesses.” That’s right. The super committee just might cancel Christmas. The Post has apparently given up on the stock market as an indicator and decided, based on zero evidence, that failure by the super committee will cause consumer confidence to tank. Tomorrow they’ll assess its potential effect on global warming.

    Hilariously, the Post has also put up on its home page a sort of super committee doomsday clock. As I write we are 8 days, 7 hours, 51 minutes, and 49 seconds away from the super committee apocalypse. Sound the klaxons! Get me Jill St. John in a bikini! The underwater compound’s gonna blow! A-woo-ga! A-woo-ga!

    • Bingham

      There’s no news in the truth and no truth in the news. The Post is the organ of inside-the-beltway Washington, period.

    • Okie Exile

      Get your facts straight. Jill St. John was in a bikini in an exploding offshore oil platform compound, not an underwater one.

  • Ogemaniac

    How about we just raise our tax rates to something similar to Germany’s, which would be more or less sufficient to balance the budget without cuts? Clearly, this has not destroyed their economy, which should be completely mystifying to conservatives. This is especially true because Germans also pay twice as much for energy as Americans. According to conservative ideology, Germany should be a hell-hole. In contrast, it is a pretty darned nice place to live.

    We have the fourth lowest tax rates and the eighth lowest spending of the 34 OECD nations. We do not have a spending problem, we have a taxing problem. Anyone who says otherwise is selling something.

    • Sinan

      Haven’t you heard? All of Europe is a disaster and they live lives of quiet desperation under the burden of oppressive governments who fail to grasp the central lessons of history. Professor Newt has a PHD in European History, pay him a couple million and he will educate those poor souls living in such oppression and despair.

  • balconesfault

    We can rail and rant all we want at Congress, but its actions precisely conform to what most American voters want. No cuts to Social Security or Medicare, no tax increases …

    CBS News/New York Times Poll. Oct. 19-24, 2011

    “In order to lower the nation’s budget deficit, do you think taxes should be increased on households earning one million dollars a year or more, or should the government address the budget deficit without increasing taxes on those households?”
    Should Increase: 65%

    CNN/ORC Poll. Oct. 14-16, 2011.
    “Please tell me whether you favor or oppose the following . . . .”
    “Increasing the taxes paid by people who make more than 250 thousand dollars a year”
    Favor 63%

    “Increasing the taxes paid by people who make more than one million dollars a year”
    Favor 76%

    There is a huge political groundswell out there to raise taxes on the wealthiest Americans back up to Clinton levels, at least. America’s politicians are basically shooting the finger at their constituencies … or at least the constituencies that vote for them, rather than those who pay for their campaigns.

    • think4yourself

      The politicians are listening to (a) those who scream the loudest (Tea Partiers, conservative media, Grover Norquist) and (b) those who send money their way (and most do it to receive money back in the form of favorable tax treatment and entitlements written in legislation).

  • think4yourself

    If they don’t do a deal (and if the GOP doesn’t agree to real tax revenue I hope they don’t do a deal). I hope the President sticks to his guns and veto’s any attempt to unwind the automatic budget cuts.

    I’m okay with this failing as long as the Bush tax cuts are reversed (for everyone including middle income). Or if some version of Bowles/Simpson gets passed. I’m not optomistic on either of those happening because everyone’s screaming to “protect the middle class”.

  • Traveler

    More BS. Another “fact” that Americans don’t want tax increases. Once I saw that, I moved to the comments.

    Another BS FF columnist. Why does DF put up with such counterfactual posts?