Super Committee

On November 19, 2011 we got a heads up that the Democrats on the deficit reducing Super Committee rejected a last ditch offer from the Republicans for $545 billion in cuts over the next decade because there were no tax increases on the wealthy. On this same date, the US House of Representatives rejected a Republican proposal to add a balanced budget amendment to the Constitution. People – I hope you remember that this same effort was a big reason why getting a budget back in August was delayed causing our credit rating to fall.  

On November 21, the Super Committee quit in defeat (they still had a couple of days to their deadline so they probably wanted to leave for their Thanksgiving holiday). The Super Committee was made up of Senators Kyl – Minority Whip from Arizona, Toomey-from Pennsylvania, Portman-Ohio, Baucus-Montana, Murray - Caucus Secretary and Campaign Committee Chair from Washington, and Kerry-Massachusetts and Representatives Hensarling-Texas, Camp-Michigan, Upton-Michigan, Becerra-California, Clyburn-South Carolina and Van Hollen-Maryland; 6 Democrats and 6 Republicans all of whom were part of the budget crisis. So, I hope this result is of no surprise to anyone. An Independent and/or non-political civilians should have been included if we wanted something different than a delay tactic.

The Committee was given special powers over taxes and spending. Democrats wanted cuts balanced with tax increases on the wealthy Democrats and Republicans would only agree to close SOME tax loopholes. Per Jake Tapper the automatic spending cuts were cuts that no one wanted and designed to force the Committee to take a scalpel and come up with a thoughtful and considerate plan. I agree with ABC News saying it’s really a colossal and embarrassing failure. As usual, stock markets all over the world dropped – the US Dow went down 248.85 points. I really have a problem with this. The $1.2 trillion in automatic cuts do not take effect until 2013; nothing is different today than it was a week ago - there should be no fuss. I feel it’s just more Wall Street manipulation.  

The $1.2 trillion in automatic cuts are directed to Medicare, Medicaid, and the Pentagon (over half the cuts would be in the defense budget). Defense Secretary Leon Panetta says he’ll have to cut troops to their smallest level since 1940; cutting weapon systems and personnel, turning our defense into a paper tiger and leading us to a “hollow force”. Because of the failure of the Committee, Congress is expected to come back after Thanksgiving and deal with the previously approved payroll tax cuts and the unemployment benefits ending it December and it’s possible that a tax increase of 2% for all Americans could go into effect January 1, 2012.

The President in his speech said in September he sent the Committee a plan that would have more than reached the goal. His plan would have cut the deficit by $3 trillion by cutting spending, slowing the growth of Medicare and Medicaid and asking the wealthiest Americans to pay their fair share. In addition to his plan, there were a number of others plans from both Democrats and Republicans for them to consider. There are still too many Republicans that refuse to listen to the voices of reason that are coming from outside of Washington (non political economists); they insist on protecting $100 billion worth the tax cuts for the wealthy 2% of Americans. We are still in a better place than we were in August, either Congress comes up with the $1.2 trillion in cuts or these automatic spending cuts kick in. There are already some in Congress trying to undo the automatic spending cuts. My message to them is NO – I will veto any attempts to avoid the automatic spending cuts - we need to keep the pressure up to compromise. The only way the automatic cuts will not take place is if Congress gets back to work and comes up with at least the $1.2 trillion; they still have a year to figure it out. The president said on ‘Keeping it real with Al Sharpton’ - “It must be my religious faith Reverend. Because hope springs eternal and I continue to believe that at some point common sense will prevail and we’ll be able to work something out.”

On November 22, Financial Journalist Trish Reagan said – “if you’re a deficit hawk this ends the Bush tax breaks (scheduled to expire at the end of 2012 if Congress does nothing). This is more evidence, more proof that in fact there is a disconnect in Washington, that it’s not functioning as it should, that there is a breakdown and everything has become so partisan”. She said look at Europe, that’s a great example of the breakdown of the political system as a result of economic stress. Resolving the political dysfunction is in the hands of the voters.