It’s not a matter if “if” the so-called supercommittee, charged with finding trillions of dollars in deficit savings in of all places, Washington, will fail. It’s a matter of when.
And when could come as soon as Monday. The bipartisan, bicameral group could announce its failure to reach a consensus on a combination of budget cuts and “revenue increases” (one doesn’t say “tax increases” in polite company among Washington’s millionaire congress…) as soon as tomorrow, and the Wapo says that’s not good for a number of reasons:
Democrats and many economists consider particularly urgent the need to extend jobless benefits and the one-year payroll tax cut. With national unemployment stuck at 9 percent, and the ranks of the long-term unemployed at record levels, the government is providing up to 99 weeks of support to about 3.5 million people.
Meanwhile, the payroll tax cut, enacted last December, allows most American workers to keep an additional 2 percent of their earnings, a boon to tight household budgets as well as the economic recovery. Economists at J.P. Morgan Chase recently estimated that if Congress does not extend the two measures, economic growth next year could take a hit of as much as two percentage points — enough to revive fears of a recession.
Time is also running out for doctors who see Medicare patients. These physicians are scheduled to absorb a 30 percent cut in government reimbursements in January. A long list of tax breaks, including an inflation adjustment that protects more than 30 million families from paying the alternative minimum tax, also will be eliminated unless Congress acts.
Although many of the expiring provisions have received bipartisan support in the past, this year they face a welter of political obstacles, none more important than cost. Extending them all through 2012 threatens to add nearly $300 billion to annual budget deficits — and therefore to future borrowing — darkening the nation’s fiscal outlook at the very moment lawmakers had hoped to reassure financial markets with fresh savings.
All potentially very bad things. But Republicans aren’t of a mind to extend jobless benefits and the payroll tax cuts anyway, because those only help poor people. What Republicans on and off the committee want — and really the only thing they seem to deeply desire — is the permanent extension of the Bush tax cuts, particularly those that benefit the wealthy. Touch those, and Republicans won’t agree to any bargain, no matter how sweet the cuts to federal programs that help the unwashed. And so, the supercommittee was really always doomed to fail.
Meanwhile, Paul Krugman says failure is a good option:
Why was the supercommittee doomed to fail? Mainly because the gulf between our two major political parties is so wide. Republicans and Democrats don’t just have different priorities; they live in different intellectual and moral universes.
In Democrat-world, up is up and down is down. Raising taxes increases revenue, and cutting spending while the economy is still depressed reduces employment. But in Republican-world, down is up. The way to increase revenue is to cut taxes on corporations and the wealthy, and slashing government spending is a job-creation strategy. Try getting a leading Republican to admit that the Bush tax cuts increased the deficit or that sharp cuts in government spending (except on the military) would hurt the economic recovery.
Moreover, the parties have sharply different views of what constitutes economic justice.
Democrats see social insurance programs, from Social Security to food stamps, as serving the moral imperative of providing basic security to our fellow citizens and helping those in need.
Republicans have a totally different view. They may soft-pedal that view in public – in last year’s elections, they even managed to pose as defenders of Medicare – but, in private, they view the welfare state as immoral, a matter of forcing citizens at gunpoint to hand their money over to other people. By creating Social Security, declared Rick Perry in his book “Fed Up!”, FDR was “violently tossing aside any respect for our founding principles.” Does anyone doubt that he was speaking for many in his party?
So the supercommittee brought together legislators who disagree completely both about how the world works and about the proper role of government. Why did anyone think this would work?
Well, maybe the idea was that the parties would compromise out of fear that there would be a political price for seeming intransigent. But this could only happen if the news media were willing to point out who is really refusing to compromise. And they aren’t. If and when the supercommittee fails, virtually all news reports will be he-said, she-said, quoting Democrats who blame Republicans and vice versa without ever explaining the truth.
So the supercommittee will fail – and that’s good.
For one thing, history tells us that the Republican Party would renege on its side of any deal as soon as it got the chance. Remember, the U.S. fiscal outlook was pretty good in 2000, but, as soon as Republicans gained control of the White House, they squandered the surplus on tax cuts and unfunded wars. So any deal reached now would, in practice, be nothing more than a deal to slash Social Security and Medicare, with no lasting improvement in the deficit.
Also, any deal reached now would almost surely end up worsening the economic slump. Slashing spending while the economy is depressed destroys jobs, and it’s probably even counterproductive in terms of deficit reduction, since it leads to lower revenue both now and in the future. And current projections, like those of the Federal Reserve, suggest that the economy will remain depressed at least through 2014. Better to have no deal than a deal that imposes spending cuts in the next few years.
But don’t we eventually have to match spending and revenue? Yes, we do. But the decision about how to do that isn’t about accounting. It’s about fundamental values – and it’s a decision that should be made by voters, not by some committee that allegedly transcends the partisan divide. …
Like many on the left, who unlike Krugman, acknowledge that the “recision” option built into the supercommittee process, exempts both Social Security and Medicare and Medicaid benefits (hitting only medical providers and insurers with decreased payments), Krugman is rooting for the supercommittee to fail. And in fact, when it does, the good news for Democrats is that:
1. Republicans will own a $600 billion-plus reduction in the defense budget, which will hit home all across the country in states and counties where the war stuff is built.
2. Democrats will celebrate those same cuts, since this will be first time the military takes a haircut in many people’s lifetimes, plus they’ll get to point the finger at Republicans for refusing to allow rich people to pay a dime more in taxes to save those jobs and protect our heroes in and after combat.
3. Democrats will be emboldened to use the fact that they now hold all the leverage — and they do; read this very smart post at ThePepolesView to get the full explanation — to put a knife to the throat of the Bush tax cuts. After all, whether Barack Obama is re-elected or not, Democrats are quickly losing any incentive to give Republicans any extension of the Bush tax cuts, since they no longer have to absorb the blame for raising even middle class tax cuts.
In short, Republicans have locked themselves into an uncomfortable position — their entire negotiating position boils down to protecting the tax cuts of the top 1 percent at any cost — at the cost of tanking the economy, slashing the military’s budget, cutting doctors and hospitals’ Medicare payments and risking both another downgrade by the financial poohbahs and another recession, all to protect the rich from the “dirty hippies” (and the middle class.)
Liberals may have kicked and screamed at the debt ceiling deal that wrought the supercommittee, but really, the committee, and its inevitable failure, is the best thing to happen to Democrats since “yes we can.”