As the November 23 deadline approaches, it looks increasingly less likely that the congressional supercommittee tasked with cutting $1.5 trillion from the national deficit will be able to come to an agreement.
Expectations for a consensus couldn’t be much lower, as lawmakers are not now being faced with the added urgency of an impending government shutdown nor the possibility of default that spurred resolutions in April and August, respectively.
In order to avoid the sort of ransoming that characterized budget discussions earlier this year, or the resulting hysteria that led to a collapse in consumer confidence and priced itself into markets, lawmakers this time prepared a much less cataclysmic backstop: automatic spending cuts.
Though $1.3 trillion in automatic spending cuts were supposed to force the panel to agree upon a more palatable option, they will not take effect until January 2013, giving next week’s deadline much less significance. Lawmakers have a full year left to devise alternatives.
For that reason, one of the major ratings agencies has already said the lack of an agreement, by itself, will not result in a downgrade of government debt. It also explains why Republicans and Democrats have ceded little ground in negotiations.
As a result, any hope for an agreement was all bust lost on Thursday. One of the twelve congressmen on the supercommittee, Senator Max Baucus (D-Mont.) said politicians in Congress and the White House are “too worried about their jobs in order to reach an agreement,” as any agreement would be sure to “upset a lot of people on both sides.”
“Not enough people are willing to do it, even though it would be the right thing for the country,” said Baucus. Invoking the memory of his nephew and more than 4,000 other Americans who have died in the Iraq war, Baucus said, “Compared with the thousands who have given their lives in service to this country, I think it’s tragic and it speaks volumes.”
Talks on Thursday consisted mostly of Democrats and Republicans meeting separately. A bipartisan group gathered briefly in the evening, but there was no immediate sign of progress.
If no agreement is reached by next week, many lawmakers and senior aides say a deal is unlikely to be completed until after the November 2012 elections, when Congress will be facing the prospect of unprecedented cuts to the Pentagon and other agency budgets as well as the expiration of George W. Bush-era tax cuts, which would raise taxes for virtually every American in January 2013.
Democrats foresee having more leverage over Republicans as the deadline draws nearer, knowing that their opposition would want to avoid across-the-board tax hikes. However, that is not to say the battle won’t begin before next fall.
Some Republicans, including Senator John McCain, have vowed to draft legislation preventing the $54 billion in cuts to the Pentagon scheduled to take effect in January 2013, a move that Democrats have vehemently opposed.
Meanwhile, Democrats from the group of moderate senators known as the “Gang of Six” are talking about reviving a debt-reduction plan that would tackle all the biggest drivers of future borrowing and stabilize the debt as a percentage of gross domestic product by the end of the decade.
While many politicians and civilians alike hope that the supercommittee will deal with the problem before the 2013 cuts — known as the “sequester” — begin, interest groups on both the right and left have begun to promote the sequester as a preferable alternative to a debt-reduction deal that would target favored programs.
The sequester was designed to be balanced, split evenly between defense spending, which Republicans have traditionally protected, and domestic initiatives, which Democrats are loath to cut.
Staunch anti-tax Republicans suspect the sequester would likely be better than any deal effected by the supercommittee, as it avoids tax increases altogether. Meanwhile, some liberal groups would prefer the sequester to any deal that might cut health and retirement programs. Though the sequester would cut agency budgets, spending for the poor and elderly — including food stamps, Medicaid, and Medicare — would be exempted.
“All of our groups are very well united around the idea that no deal is better than a bad deal,” said Eric Kingson, co-director of the Strengthen Social Security Campaign. “At least if you have no deal at this point, there’s time to step back and talk about it as a nation and think about the alternatives.”
However, Baucus predicts that, if the supercommittee does not reach a deal by Thanksgiving, the next year will be dominated by partisan bickering aimed at gaining a political advantage going into elections.
“Both sides are going to offer all kinds of message amendments. It’s just going to be, probably, unpleasant. And probably unproductive,” he said.
Any failure to come to an agreement might also mean the further unraveling of the government’s credibility. “The decision of the supercommittee goes beyond just the budget. It’s become a symbol now of the ability of our elected representatives to get something done,” said Frank Newport, the editor in chief of Gallup, which tracks public opinion of politics and the economy.
“If the supercommittee fails, I think the reaction of the public, based on the data, will be even more negative, not just about the government but their confidence in the economy in general.”