The Super Committee: Why Failure Is the Best Option
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The Fiscal Times
November 15, 2011

The bipartisan Super Committee is headed for failure, and that may be a good thing.

While no one is actively campaigning to see the 12-member committee miss its Nov. 23 deadline for coming up with a $1.2 trillion deficit-reduction plan, that outcome will be silently welcomed by congressional partisans on both the Left and Right. They remain opposed to making compromises that would force them to abandon key planks in their election-year platforms.

Less than a year before an election in which every elected branch of government will be up for grabs, the prospect that a majority of Republicans in the House will go along with any measure that increases taxes remains remote since it will alienate Tea Party stalwarts and violate Grover Norquist’s Americans for Tax Reform anti-tax pledge. For Democrats struggling to hold on to the Senate and hopeful of reclaiming the House, cutting entitlement programs like Medicare and Social Security will weaken their appeal to the key senior constituency ahead of next year’s campaign.

But beyond the politics, the failure to come up with a compromise plan may represent the best of all possible outcomes for those looking for long-term answers to the nation’s fiscal imbalances. The law passed last August imposed an across-the-board $1.2 trillion cut – so-called sequestration – if the Super Committee fails to come up with an alternative plan by Thanksgiving. Those cuts will hit defense and domestic programs equally.

But those cuts won’t begin to go into effect until January 2013, two months after next fall’s election. Given that both parties have expressed concern about defense cuts in the magnitude of $600 billion, the incentive for the lame-duck Congress to take a more strategic approach will be high. Moreover, there will have just been a huge election-year debate about the best way to balance domestic and military cuts and what approach to take to curb the growth of entitlements.

There will also be new budget proposals from the White House, as well as alternatives offered by the House and Senate “For a lot of members, protecting their party’s priorities right now is more important than getting a deal,” said former congressional staffer Stan Collender, a senior partner at Qorvis Communications, which has numerous Wall Street clients. “If sequestration is triggered, we’ll spend all of next year debating how to avoid it.”

There also is a wild card on the revenue side of the equation. All the Bush-era tax cuts, which Democrats want to see scaled back, at least for the well-to-do, expire at the end of 2012. That will throw into the mix tax changes that absent other reforms will raise $4 trillion in new revenue over the next decade.  No one, given the state of the economy, wants to see all of those tax increases go into effect.

The business community, meanwhile, continues to push for far-reaching corporate tax reform that would lower rates in exchange for eliminating special breaks in the tax code. A partial deal like the proposal floated by Republicans on the Super Committee two weeks ago, which would lower individual rates by limiting some individual deductions, could undermine that corporate lobbying campaign since it blows another hole in the long-term budget, according to Democrats on the Super Committee.

“That is a net $500 billion decrease in revenue,” Rep. James Clyburn, D-S.C., said Monday on Bloomberg television. “Now, I am not a mathematician, I am a history major. But I know math a little bit better than that.”

As for President Obama, who’s been criticized in recent days for failing to lend support to the Super Committee process, there is no looming deadline pushing him to foster a compromise, even though striking a deal would help his reelection chances by broadening his appeal to centrist voters. Unlike last August when the first $1 trillion deficit plan was enacted, though, the debt ceiling rises automatically next year unless Congress overrides his requests, which is unlikely with Democrats in control of the Senate.

“I don’t think they’ll get a deal done,” said Douglas Holtz-Eakin, the former Congressional Budget Office chief who has emerged as a key Republican adviser from his perch at the American Action Forum. “They’re being asked to pass programs with big changes in taxes and entitlements and that requires presidential leadership.”

Those pushing for the Super Committee to “go big” and reach a grand compromise are now pinning their hopes on claims that there will be another downgrade to U.S. debt or even a financial market meltdown if Congress fails to strike any kind of a deal. “If we have a downgrade, it will be damaging,” said James Kessler, chief of government relations for the centrist Third Way. “Sequestration is real, but the markets won’t think it’s real because there are too many off ramps.”

But partisans on the Hill are already dismissing such talk. “I don’t see any reason why there ought to be any impact on the market if the Super Committee doesn’t meet its fixed deadline by the end of this year,” said Rep. Henry Waxman, D-Calif. “The deficit reductions are still going to be achieved in a sequestration in 2013. We still have a whole year to figure out those reductions.”

Eric Pianin contributed to this story.

spent 25 years as a foreign correspondent, economics writer and investigative business reporter for the Chicago Tribune and other publications. He is the author of the 2004 book, The $800 Million Pill: The Truth Behind the Cost of New Drugs.