re Supercommittee: No Deal Is…

November 15th, 2011 at 4:58 pm

…better than a bad deal.

I don’t like sequestration (the automatic cuts that kick in if the supercommittee fails to vote out a plan) any more than you do.  But a lot of what I hear shaping up sounds worse than the triggered savings of $1.2 trillion over 10 years—remember, Soc Sec, Mcaid, Mcare, food stamps, refundable credits for low-income families are all largely exempt from the trigger.  And half the triggered cuts come from defense.

And now, my CBPP colleague Paul Van de Water points out that cuts to the non-defense discretionary side of the budget—programs like education, training, R&D, transportation infrastructure, child care, Head Start, and more—could be larger in the deal under consideration than under the trigger:

If the congressional “supercommittee” doesn’t agree on new deficit-reduction measures, non-defense discretionary spending…will face about $300 billion in automatic, across-the-board cuts over the 2013-2021 period.  That’s in addition to the large cuts that the Budget Control Act already put in place.

But proposals that the committee is considering — such as the Democratic offer of early last week — could cut non-defense discretionary spending by even greater amounts…

The Democratic offer would cut discretionary spending as a whole — defense and non-defense combined — by $400 billion over ten years.  The offer states that these cuts would be divided equally between defense and non-defense programs, but it doesn’t explicitly include the critical mechanism needed to guarantee that this would happen:  separate caps for defense and non-defense spending for each year from 2014 through 2021.

Absent such caps, Congress could well poach savings from NDD to avoid cutting defense spending, and that could lead to cuts in excess of the $300 billion noted above.

Moreover, as Paul points out:

Using the same baseline as the Bowles-Simpson commission, and including the spending cuts already enacted in the Budget Control Act, the ratio of spending cuts to tax increases in the Democratic offer is 14-to-1.  The Democratic offer also would make raising taxes more difficult in subsequent deficit-reduction efforts by locking in the Bush-era tax cuts for upper-income households.  As a result, its adoption would create substantially greater pressure to cut nondefense discretionary spending in the future.

That locking-in point is critical.  If the supercommittee agrees on a deal that locks in lower income tax rates, whether we’re talking permanent extension of the highend Bush cuts (locking in the current 35% rate) or the much, much worse idea from the committee R’s of taking that rate down to 28%, that way lies madness.  It’s really locking in the Norquistian starve-the-beast strategy where future rounds of deficit savings plans depend entirely on spending cuts, with no new revs allowed.

So fear not no deal.  That would be a lot better than what I’m hearing about.

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8 comments in reply to "re Supercommittee: No Deal Is…"

  1. foosion says:

    >>So fear not no deal. That would be a lot better than what I’m hearing about.>>

    I really wonder what’s wrong with Democratic politicians. They seem poised to agree to a deal that’s terrible policy and terrible politics.

    No deal would be vastly superior to what’s being reported as being under discussion.

    • Jan Rooth says:

      What’s wrong with them is that all but a tiny handful of them are wholly owned by the financial sector, who see nothing wrong with our becoming a neo-feudal society.

  2. Tom says:

    Two possibilities: one is the Democrats are playing chicken, offering the GOP 90% of what they want and getting ready to nail them if they turn it down. two is that they are a nasty lot of cynical bastards who will screw their base for some imaginary thread of an electoral benefit. Both possibilities make me want to vomit, but the first leaves me with the slight hope that the republicans are more wacko than the democrats are stupid and cynical.

  3. Jesse_EngAmer says:

    It will in fact take some political will to enact policy solutions, as you say. There is too much regulatory burden on small companies that drive business, competition and job creation as well as large companies too. Bernie Marcus who co-founded Home Depot in the 70’s, which employs 321,000 could not have built his company today due to regulations promulgated by the federal agencies, future taxation levels uncertainty and rising health care costs.

    Even president Obama admitted that over regulation was a danger to job creation.

    • Th says:

      I heard Bernie say that on a couple of occasions while he was raising money for George Bush. He never said what regulations passed since the 70’s would make it harder for him to start a Home Depot today.

      Home Depot was started in retro-fitted big box retail stores funded by venture capital. Today he would get tax incentives and employee training paid by the local or state government and who knows what other freebies.

      Just because Bernie says it doesn’t make it so.

    • perplexed says:

      You make no mention of the thousands of “small businesses” (independent building material dealers and hardware stores) that were displaced by the “big box” home depot stores or the hundreds of thousands of employees who lost their jobs due to this displacement and now work for Home Depot for considerably less than they were making before. I suppose its possible, but I doubt total employment (and seriously doubt total real payroll) are higher now than before the “big box” takeovers of the independents. Are you really suggesting that we should dispose of regulations to further support this race to the bottom? Maybe it is only more collapsing roofs and more houses burning down that can break through these memes.

      In the meantime, I have a couple of Nigerian bank accounts we should talk about.

  4. Jim Gonyea says:

    I don’t remember where I read it, but I read what I believe is strategy that fits the Republicans MO. The concept goes that the Super Farce fails and then the Republicans remove the defense cuts from the sequestration. The Republicans control the House, so it passes the House. There’s enough Democratic Senators in the Senate who would vote with the Republicans there to pass it. So the social program cuts go through, but the military cuts don’t. The Republicans have already proven themselves to be negotiators in bad faith. No reason to expect they won’t continue the pattern now. This may be the game they’ve played from the beginning. No agreement with the Republicans is worth the paper it’s written on. Quite simply you can’t negotiate with someone who is a dishonest agent.

  5. Jill SH says:

    I’m looking for that bumper sticker:
    “So how’s that trickle-down working out for ya’?
    Bush tax cuts – 10 years and counting!”

    Could we just consider sitting on our hands and letting the Bush tax cuts — yes, all of them — expire at the end of 2012, and let a new congress deal with creating a new tax cut structure?

    Politically how would it play out if a) we had a Dem-controlled Congress; b) a Repub congress; c) a split congress? (Assume Obama re-election. I can’t cope with imagining anything else.)

    Or the lame duck Congress in Dec ’12 facing any of those situations?

    I know that the lose of those tax cuts mean a lot to the middle class too, but wouldn’t that mean that much more pressure to create a new tax cut proposal, hopefully more progressive?