11.20.11

Why the Supercommittee Flopped at Reaching a Deal to Cut the Budget

Members of Congress’s special debt panel are set to throw in the towel today, nowhere near a deal on tackling the nation’s deficit. Patricia Murphy on why they never stood a chance.

Put a fork in them.

Just one day before the congressional supercommittee’s drop-dead deadline to come up with a plan to cut trillions of dollars from the national debt, and days after the country racked up its 15 trillionth dollar of borrowed money, panel members fanned out across Washington Sunday morning—not to negotiate a last-minute deal, but to blame the other guys for messing everything up.

“In Washington, there is a group of folks that will not cut a dollar unless we also raise taxes,” Arizona Sen. Jon Kyl, a Republican committee member, complained on NBC’s Meet the Press.  “The only real breakthrough here was the Republican offer to actually increase the amount of revenue through the tax code.”

No sooner had Kyl finished speaking than John Kerry appeared on the same show, essentially calling Kyl a liar.

“What Jon just said is patently not true. We just cut $917 billion without one dime of new revenue. He knows it, we just did it...this is just nonsense,” Kerry said.  “If this weren’t so serious I might laugh.”

But nobody was laughing on Capitol Hill as it became increasingly clear that the latest supergroup of bipartisan dealmakers was about to go down in flames despite the high hopes in August, when Congress gave them the power to re-jigger the entire federal budget and President Obama vowed he would “stay on it until we get the job done.”  But four months later, they haven’t gotten the job done. And according to aides, they were never even close.

“There’s a 99 percent chance this goes belly-up tomorrow,” a senior Democratic aide told The Daily Beast Sunday, describing a process in which Republicans refused to negotiate any deal without an extension of the Bush tax cuts, now set to expire in 2013. “It’s not entirely clear how it’s going to fail, but it’s going to fail.”

The factors working against the supercommittee’s success were always exponentially stronger than the factors working in its favor.

The idea that 12 members of the House and Senate, each hand-picked by their party’s leadership, could rise above partisanship where Washington has not, was hard to imagine from the start. Equally impossible to believe was a scenario with Republicans and Democrats agreeing to increase taxes, a tried-and-true book-balancing tactic that has now morphed into a philosophical gut-check issue for the bases of both parties.

Add to that the House and Senate committee chairmen who became more and more miffed over losing their power to pick future spending cuts; rank-and-file members more and more worried about losing their elections over a tax increase; a president who does not want to engage with Congress; and a Republican caucus more and more convinced that it will control Capitol Hill in 2013, and the recipe for disaster was complete before the committee even began to meet.

The result, aides say, was intransigence on both sides, particularly among Republicans over the future of the Bush tax cuts and among Democrats over cutbacks in entitlement spending, that never gave way to bona fide negotiations.

On Sunday morning, Republicans insisted that they were not the ones to blame.

Rep. Jeb Hensarling, the Republican co-chairman, said that his side could not consider tax increases, which they believe would only hurt the economy.

“You’ve got people who have very different ideas about what it takes to produce jobs,” he said. Kyl also detailed the latest offer put forward by Republicans, from Sen. Pat Toomey, that would have closed some tax loopholes for the top 2 percent of earners in exchange for extending all of the Bush tax cuts.

Democrats said the Toomey offer was never one they could consider. “The Toomey plan results in the biggest tax cut since the Great Depression,” Kerry said. “Now we didn’t come here to do another tax cut to the wealthiest people while we’re asking fixed-income seniors to ante up more.”

Above and beyond blaming Republicans for refusing to consider revenue increases, Kerry laid the blame for the Republicans’ position on Grover Norquist, the founder of Americans for Tax Reform, whose “no-tax” pledge Kerry said has defined the Republican parameters on the debate within the supercommittee. “I hear about this pledge—a pledge to a lobbyist,” Kerry said. “The fact is I took a pledge, a pledge to the Constitution of the United States, to defend it.”

It’s hard to imagine that Congress will find consensus on these issues when the politics of failure serve both parties more than the politics of compromise.

With the prospect of failure looming, some of the committee members made the case that not getting an agreement wasn’t such a bad thing after all.

“Think of it this way,” Democratic Rep. Javier Bacerra said on Fox News Sunday.  “It’s not an issue between a deal and no deal. It’s a matter of getting a better deal.”

According to Bacerra and more than a few members of Congress, the pre-Thanksgiving deadline they’ve been working toward has really been more of a target. The real deadline will come in 2013, when the $1.2 trillion in automatic, across-the-board budget cuts kick in. Although the cuts were once imagined as a doomsday scenario to force the supercomittee to act, they are now being spun as a chance for Congress to take a “smarter,” “more deliberate” approach to shrinking the budget.

Much like the sequestration, the once-feared threat of credit downgrade in the face of the supercomittee’s failure is also not as real as it was once imagined.

Mark Zandi, the chief economist for Moody’s Analytics, said the markets assumed all along that the committee would not find a compromise.

“I don’t think it will be much of a reaction,” Zandi told Fox’s Chris Wallace. “It’s all relative to expectations and investor expectations with regard to the committee are very, very low.”

But Zandi and several Capitol Hill aides said that a downgrade could materialize if Congress does not enact the sequestered cuts as planned. They also pointed to more economic hurdles for Washington when emergency unemployment benefits and the current 2-percent payroll tax holiday for working Americans expire at the end of 2011. Twelve months later, Congress must also deal with a fix to the alternative minimum tax; a massive cut to Medicare payments to doctors; and the expiring Bush tax cuts.

It’s hard to imagine that Congress will find consensus on those issues when the politics of failure serve both parties more than the politics of compromise.

An internal poll for Democrats shows that voters are likely to blame Republicans more for the supercommittee’s demise than they’ll blame Democrats, while Republicans openly ask why they would negotiate away their most-favored tax cuts now, when they believe they are less than a year away from taking back the Senate and possibly the White House.

One hint of a possible path forward came from Democrat Joe Manchin, a recent addition to the Senate from West Virginia, who said on CBS’s Face the Nation  that a group of more than 100 Democrats and Republicans is ready to step forward if the supercommittee admits defeat.

“We cannot accept failure,” Manchin said. “I don’t want to be a part of the generation that turned over the keys to the next generation with the country in worse shape.”

The supercommittee’s mandate to announce a plan for a congressional vote in time for its Wednesday deadline is Monday evening, a target no one in Washington has predicted it will meet.

“Reality,” said Hensarling, “is starting to overtake hope.”