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Debt Committee Impasse May Keep Deficit Talks Going Through 2013

Monday, November 14, 2011

The Deficit Reduction Super Committee holds meeting. (Chip Somodevilla/Getty)

Welcome to Politics Bites, where every afternoon at It's A Free Country, we bring you the unmissable quotes from the morning's political conversations on WNYC. Today on The Brian Lehrer ShowPolitico congressional reporter Manu Raju talked about the latest political jockeying around the super committee negotiations.

Window dressing

Nine days away from the deficit reduction super committee deadline, prospects for a compromise between Democrats and Republicans look grim—as they have since the spring's budget showdown, through summer's debt ceiling negotiations, and for the foreseeable future. The more things change, the more they stay the same.

Tasked with reducing the deficit by $1.2 trillion, the super committee is at a predictable impasse: whether or not to raise revenue through higher marginal tax rates and fewer deductions. Will the two sides be able to find common ground that confronts the deficit meaningfully by Thanksgiving? Manu Raju isn't holding his breath.

If they find anything, it's going to be window dressing...I think they could come up with something, but not anywhere near the level most economists say needs to happen in order to get this country back on a fiscal sustainable path.

The $4 trillion scenario

Guess which side wants to raise tax rates, and which side wants to lower them even further.

It's the same debate over and over again—same players, same talking points, same battle lines. Republicans want to see the Bush-era tax cuts permanently extended rather than have them expire, characterizing the latter as a tax increase. Democrats want to restore the top income tax rate and the capital gains tax to pre-Bush levels.

But the Democrats suggest this as part of a $4 trillion deficit reduction plan, one that goes above and beyond the $1.2 trillion requirement. Raju said that in order to close the fiscal gap by that amount, the government couldn't possibly rely on Republican-favored austerity measures alone.

If you're talking about a $4 trillion plan, it can't all get done through cuts in entitlements; it has to come through revenue raisers, getting rid of a lot of deductions, and really overhauling the tax code significantly.

Essentially, Democrats are challenging Republicans to decide which is more important: a lower deficit, or lower tax rates. Know how all the Republican presidential candidates during debates say they won't accept a $1 increase in tax revenue for a $10 decrease in spending? Manu Raju said that their counterparts in Congress are holding the line similarly.

That level of revenue that would be raised, in the trillion-dollar range, is just something Republicans refuse to go along with.

2013

When the super committee was created by law back in August, Congress made sure the deadline had teeth: if the committee fails to come up with something by November 23rd, it would trigger $1.2 trillion in automatic spending cuts across the board. About half those cuts would fall solely on defense, which, according to Raju, makes the trigger much scarier to Republicans than Democrats.

Republicans are the ones voicing more concern about [the trigger] because of the defense cuts. The Medicare cuts are capped at about two percent...so there's less outrage coming from the Democratic side of the aisle.

Fortunately for politicians hoping to hold on to their jobs a little longer, the deadline's teeth aren't sharp. Raju said the $1.2 trillion in automatic cuts wouldn't actually take place until 2013, giving elected officials a long road down which they can kick what is by now a severely dented can. Strap in.

They have the entire year of 2012 to haggle over the sequestration [if they fail by Thanksgiving].

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Comments [8]

The reason the 'Stupor Committee' (compliments now4yourconsideration) cannot reach a consensus recommendation is that they collectively forgot the first rule of being smart: Don't assume you know the answer until you know the question. Plus being politicians what evidence do we have that this colleciton of the 'best and brightest' that the two parties have to offer are competent, informed and innovative problem solvers rather then the to be expected dull, dumb and dithering idiots that the public elects to represent their interests.

They weren't even bright enought to bring in someone who could show them how to approach solving a complex problem, and then after they fail to demonstrate their ability to grasp the concept, actually present a proposal to them that would both acceptable and actual work. Something none of the plans that either side would be able to proffer.

Nov. 17 2011 08:05 PM
Supercommittee= Medicare "Sustainable" Growth Rate from Rhetorical Cuts and Empty Political Showmanship


Supercommittee, meet the Medicare "Sustainable" Growth Rate.

Pretty much every year since creating the SGR to reign in growth in Medicare expenses, Congress balked and pressed the snooze button for another year or more. The bottom line, major cuts were
much debated and much vaunted, but never actually implemented as intended.

So now we have the latest political stunt -
the budget "supercommittee" - created at knifepoint by Republican intransigence over the summer.

Conveniently, any automatic cuts are due
to START after the 2012 election. So guess what, they can also be repealed, modified or extended by Congress at that
time - just like they have done over and over again with the Medicare SGR.

So again :

Budget Supercommittee ? Meet the
Medicare "Sustainable" growth rate.

For everyone else, enjoy the political theater.

Nov. 14 2011 12:41 PM
david ores from Manhattan

It is not a "Tax Hike". It is not "raising taxes". It is allowing a tax break or exemption to expire returning the rate back to normal. Call it "a return to fairness and equality". It is very poor salesmanship on the part of the Dems. Why do the Democrats allow the Republicans to name every issue to their evil advantage? Question: Are the Dems that stupid or are they complicit? Which is it?

Nov. 14 2011 11:15 AM

The Democratic "win" on sequestration probably comes not from their losses being less painful, but from the cuts to senior benefits being more likely to play into the 2012 elections based on the current state of the economy.

In many ways it seems that the Republican side has been winning in the overall debate.

The general public seems to accept the common sense logic that we need both less spending and more revenue. IE we need to contain "entitlement" programs as the population ages, and undo the Bush tax cuts for the rich.

In fact though the Republicans have been successful in putting more of the onus on seniors, the middle class and the poor to make sacrifices, and have been able to keep the ridiculous idea of even more tax cuts for the rich on the table as a possibility.

One last thought: the Reagan Tax Reform Act of 1986 tried to put all income together for taxation, around 28%. How the Capital Gains rates are now at 15% and this seems to be the starting point in congressional debate is beyond comprehension. Just goes to show this truly is a "class" issue, not a Left or Right one, as not even the Democrats seem determined to take on this inequality that actually makes our tax system regressive.

Nov. 14 2011 10:41 AM
Jack Jackson from Central New Jersey

The Congress could pass a change to the rules - now that the GOP has had time to think about it - and the President could veto!

Eight years of stimulus under Bush led to a crash that FORCED four more years of deficit spending in order to keep GDP level.

Raise taxes, spend less. Plan it properly so that the pain of the cuts doesn't fall only on the poor.

Nov. 14 2011 10:38 AM
John A.

Such a horror this is to me; that the rule of law can fall to the rule of Marketing - that getting out the "good word" trumps any objectionable but necessary action.

Nov. 14 2011 10:25 AM
Ken

It's kind of amazing to think that the Democrats may have won this round because the terms of the "sequestration" are far more favorable to them than anything the Republicans would agree to in negotiations.

Nov. 14 2011 10:22 AM
Jack from Sunnyside

But can't the legislature simply pass a bill that eliminates the sequestration requirements? Or simply repeal those requirements and go on as usual without the super-committe deal? What are the chances of that?

Nov. 14 2011 10:18 AM

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