Deal or No Deal: The False Choice of the Super Committee
The so-called “Super Committee,” charged with creating a $1.2 trillion deficit reduction plan by Thanksgiving, seems to be stalling. If the committee cannot agree to a deal, or if Congress doesn't approve of the plan that the committee produces, the debt ceiling package that passed in August will trigger almost a trillion dollars in automatic spending cuts to both defense and non-defense spending. Congress as a whole appears to be waffling between voting for a deficit reduction plan that many constituents will find unpalatable or allowing the automatic cuts to proceed, which will also make voters unhappy. However, this problem presents a false choice because there is another option: Congress could vote to select "none of the above."
Though faced with a Nov. 23 deadline, the Super Committee does not appear to be moving closer to agreement on a plan. Reports indicate that the committee is meeting infrequently; that they are cramming in last-minute, small-group meetings during the current House recess; and that some members of Congress are debating an extension of the committee's deadline to approve a deal.
What little headway the committee was making was toward dramatic spending cuts. The committee’s Democrats recently unveiled their starting proposal, to the dismay of the wider progressive community. According to an analysis by the Center on Budget and Policy Priorities (CBPP), the Democrats’ proposal called for $475 billion in cuts to Medicaid and Medicare, $400 billion slashed from discretionary spending, and $1.3 trillion in revenue increases. Combined with almost $900 billion in cuts already put in place by the debt ceiling deal, the new proposal would be a roughly three-to-two ratio of spending cuts to revenue increases.
With this as a starting point, any plan that will likely come from the Super Committee will contain even larger cuts and smaller, if any, revenue increases. The spending cuts in the Republican plan, for instance, are 63 times greater than the revenue increases it contains, according to an analysis by CBPP.
If a compromise is struck somewhere between the Democrats’ and Republicans’ opening salvos, the plan approved by the committee would severely underfund the nation’s vital health care programs, retirement safety net, and public protections, like food inspections, worker safety enforcement, and consumer protections that benefit all Americans. Insufficient revenue increases will result in balancing the budget on the backs of middle- and low-income families, while the upper-class will continue to benefit from historically low tax rates.
The alternative to a Super Committee plan, as outlined in the debt ceiling deal, is a round of automatic budget cuts. These cuts, which are “triggered” by the failure of the Super Committee to reach a deal, would be split evenly between defense and non-defense spending, with Social Security and Medicaid off the table and Medicare mostly protected. The cuts are drastic, amounting to $831 billion over ten years. Cuts of this magnitude would significantly alter many of the functions of the federal government, scaling back a whole host of government services and further straining an already overburdened federal workforce. Tens of thousands of federal employees would likely be laid off, pushing the unemployment rate even higher, further depressing consumer spending, and possibly setting off another recession.
However, the choice between a bad Super Committee plan and enormous spending cuts is a false one. Congress bound its own hands back in August, and it can unbind them if it wishes. Congress is not forced to choose the lesser of two bad options. The fiscally responsible path would be to choose a third option: undo the debt ceiling deal.
In fact, the entire premise of the Super Committee, that we absolutely must reduce the nation’s deficit immediately, is a flawed premise. The nation’s long-term debt problems are unrelated to our current deficit issues.
As CBPP has repeatedly pointed out, the current budget deficit has been caused by largely temporary issues, including two wars, multiple rounds of tax cuts for the rich (which are set to expire soon), the recent recession, the 2008 financial collapse, and the government’s reaction to the two crises. The forecasts of a larger debt in the long-term, however, are a structural problem related to skyrocketing health care costs.
Drastically cutting spending now is likely to exacerbate current and future economic problems. Delaying crucial investments to maintain public structures like education and infrastructure will end up costing more down the road. With interest rates so low, now is the time to engage in wisely targeted government spending (infrastructure repairs and maintenance, extended unemployment insurance, etc.), which could boost the money in families’ pocketbooks and allow households to increase their economic activity.
Even some congressional Republicans acknowledge that the last thing the nation needs is more cuts to federal spending. In a recent piece in the Wall Street Journal, House Armed Services Chairman Buck McKeon (R-CA) warned that the defense cuts from the debt ceiling deal's "trigger" would have "grave economic costs." The trigger's large non-defense discretionary spending cuts would also deliver a large hit to the economy.
Instead of cutting spending, either through trigger cuts or through a Super Committee plan, Congress should choose to strengthen those programs that protect the public and the environment from pollution, workers from unsafe workplaces, consumers from foodborne illnesses, and families from the whims of a volatile economy. It’s clear that neither the Super Committee nor the trigger will responsibly fund our nation’s priorities, and deep cuts risk a double-dip recession.