StanCollender'sCapitalGainsandGames Washington, Wall Street and Everything in Between



Joint Select Committee On Deficit Reduction Has Been Set Up To Fail

04 Aug 2011
Posted by Stan Collender

The Congressional Budget and Impoundment Control Act (PL 93-344) passed the House and Senate in 1974 with almost no dissenting votes -- 75 to 0 in the Senate and 401 to 6 in the House.

By today's hyperpartisan standards, the fact that a law dealing with the budget passed with virtually no opposition seems  miraculous.  It happened for two reasons. 

First, the law was outcome-neutral; It was just a process that, unlike all of the budget processes that came later, didn't dictate what the outcome should be or how it should be done.  That fact -- that the process could be used to increase or decrease the deficit or surplus by increasing or decreasing taxes and spending -- made it possible for almost everyone to vote for it.

Second, because the law didn't specify what was to be accomplished, everyone was able to assume that it would help them do what they wanted done.  If you read the debate on the Congressional Record from 37 years ago, you'll see that conservatives thought the act would make it easier to reduce the deficit, liberals thought that it would help transfer funds from the Pentagon to domestic purposes, etc.  The fact that it wasn't intended to do any of those things didn't really matter; the Congressional Budget Act, they said, could be used to do them.

In other words, the CBA was the federal budget equivalent of the fable of the six blind men touching an elephant.  Each man touched a different part of the elephant and, because they couldn't see the whole thing, described it only by that one part.

This ancient (at least by federal budget standards) history is important when you look at the Joint Select Committee on Deficit Reduction -- the 12-person committee created by the "Budget Control Act," the debt ceiling increase deal signed into law yesterday.

The Budget Control Act of 2011 overall, but especially the Joint Select Committee (for now and evermore to be called by me on CG&G as the JSC) is being viewed in precisely the opposite way from the Congressional Budget Act of 1974.  CBA was seen as an opportunity to change the debate and make some progress. By contrast, the Budget Control Act and the JSC are seen as things to be feared and, therefore, prevented from succeeding.

This has become completely and incontrovertibly evident in the less-than-24 hours since the law was signed.  During that time, congressional Republicans have made it clear that they won't appoint anyone to the JSC who will support tax increases of any kind.  They've even gone so far as to say that JSC doesn't have the authority to consider tax increases, although no one else seems to be able to find that prohibition in the law.

Democrats, meanwhile, have said that they won't appoint anyone to JSC who will consider cuts in Medicare, Medicaid, or Social Security.

This is why the JSC is bound...or virtually guaranteed...to fail.  Although none have yet been named, the members of the committee look like they will be chosen on the basis of one thing: A refusal to compromise in any way.

The JSC will be made up of six Democrats and six Republicans, 3 each coming from the House and Senate.  As this story by Robert Pear in today's New York Times and this post from Michael Tomasky in The Daily Beast shows, there is already a good deal of speculation on who might be appointed.

Here's what you should expect as far as JSC's membership is concerned:

  1. Regardless of whether they're Democratic or Republican appointees, the representatives and senators named to the committee will be junk yard dogs when it comes to negotiating.  Expect real hard asses whose first words every moring when they get up and every night when they go to bed are "no," "no way," and "never."
  2. Each side will appoint one person who knows something about the budget and, more importantly, has access to staff that will prevent agreements on technical issues like baselines that could inadvertently give up something.
  3. Almost no one appointed will either be running for reelection in 2012 or have a tough reelection fight.
  4. No member of the Gang of Six -- who ultimately demonstrated a willingness to work with the other side and compromise -- are likely to be appointed.  This almost certainly excludes Tom Coburn (R-OK) and Mark Warner (D-VA).
  5. No mavericks need apply.  The leadership in both houses and both parties will want to control this closely.

Given all this, it's just not likely that the JSC will be to agree on much of anything by the November 23 deadline imposed by the Budget Control Act. 

The Republicans have said

The Republicans have said they will not appoint anyone who will increase taxes.

You say "Democrats, meanwhile, have said that they won't appoint anyone to JSC who will consider cuts in Medicare, Medicaid, or Social Security."

However, the NYTimes article you link includes "The Senate majority leader, Harry Reid, Democrat of Nevada, said members of the panel must have “open minds.” The House Democratic leader, Nancy Pelosi of California, said her appointees would “fight to protect” Social Security, Medicare and Medicaid. Republican leaders indicated they would not appoint anyone willing to raise taxes."

Open minds means Reid might appoint someone who will cut these programs. If so, we end up with a committee that won't increase revenues (half vote against), but might cut the income security programs (a Reid appointee might vote for).


Loss of confidence in dysfunctional US government

Markets are reacting to this nightmare.

Confidence lost. We can't trust our government officials to do
what's right for the US economy.

Right now that would be focusing on creating jobs, not the deficit.

It's 1937 all over again.


Foosion has it right, probably

I see no evidence that, at least in the Senate, Dems won't behave as they have behaved in the preceding months. Pretty likely we'll get some Democrats who will be willing to balance out the Republican no-taxes-ever pledge with social security and spending cuts. Then, when this charade is all over, we'll likely find those cuts will hurt regular folks and retirees.


The Baseline Agreement

"Each side will appoint one person who knows something about the budget and, more importantly, has access to staff that will prevent agreements on technical issues like baselines that could inadvertently give up something."

Sorry, Stan, but the baseline has already been agreed to. The debt ceiling statute makes a clear reference to the Budget Control Act and the baseline that will apply to determine if the deficit reduction goal for the Joint Special Committee has been met. The BCA refers to "current law", full stop. Apparently realizing too late the error (or having realized it earlier and deciding to renege on that agreement, in which we could call it the "base lie") Gene Sperling is trying to argue that the baseline is basically anything one says it can mean. In making this claim he doesn't even bother to reference the text of the bill. Not only is the language of the bill clear on this point, but it stretches any sense of reason to now argue that the deficit reduction target agreed to is a meaningless number. And, it would be a meaningless number if the baseline were not fixed to start with.

This is off to a very bad start. For once I agree with Collender, not only for the reasons he states, but for this one especially.


The monster in the closet

If the committee cannot reach agreement, the enforcement mechanism is triggered. The fear of letting this monster out of the closet is supposed to provide an incentive to reach agreement. If Stan is right, what about this monster? Is it too ugly to let out of the closet? I think the triggered cuts would happen in January 2013 (after the next election). There is nothing to stop Congress from deciding the monster is too ugly to open the closet door and changing the rules. It has happened before. What do you think?


A broken reed (and Reid)

It's hard to see how the Democrats on the JSC (or at least enough of them to decide the issue) don't end up caving.

We've already had a Democratic Defense Secretary say publicly that the automatic sequestrations would be a disaster for the military -- while claiming to speak for a Democratic president as well.

Given the long-standing cowardice of most congressional Dems went it comes to the defense budget (always fearful of the "stabbed the troops in the back" trope) that leaves them without a credible hostage -- except for the longest of long-shot possibilities that Obama might veto an extension of the Bush tax cuts next year.

But why should the Republicans even fear that? They know they would have a reasonable shot at rounding up enough "centrist" (read: Vichy) Dems to override.

Or, assuming Obama loses and the GOP takes back the Senate next November -- both of which look more certain by the day -- the Republicans could simply re-enact the Bush cuts (deficits and rating agency opinions having both faded instantly into political insignificance once the Dems have been evicted from power).

Let's face it: The fix is already in.

The real question is what gimmick the House Republicans will dream up in next year's budget melodrama to offset (if only theoretically) the extension of the Bush tax cuts, which of course isn't reflected in the baseline for this year's melodrama.




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