StanCollender'sCapitalGainsandGames Washington, Wall Street and Everything in Between



Grover Norquist Was The Super Committee's Lex Luthor, And Other Stories

21 Nov 2011
Posted by Stan Collender

Two things if you're at all surprised that the anything-but-super committee is going to announce today that it has been unable to agree on a deficit reduction plan and so is going out of business.

First, you weren't reading Capital Gains and Games.

On August 4 -- two days after the legislation that created the committee was signed into law -- I said here at CG&G that it was "set up to fail."  A week later I posted that the now-obviously-less-than-super committee "will-accomplish-nothing."  And a number of times over the subsequent three months I argued with everyone who said otherwise that there was no reason to believe that the committee would be able to agree on even a small deficit reduction plan. (Yes, I'm taking a small victory lap here. But, hey, I'm entitled.)

Second, you weren't reading the tea leaves that were obvious even from before the hardly-super committee was set up that it was bound to fail.  Remember that it was created in the wake and because of four very obvious other deficit reductions failures over just the past year. This included the Bowles-Simpson commission that failed to get enough of its members to sign on to what its co-chairs recommended to move the process forward, the talks led by Vice President Biden that failed when House Majority Leader Eric Cantor (R-VA) walked out, the direct negotiations between President Obama and House Speaker John Boehner (R-OH) that stopped when Boehner refused to participate any longer, and the attempt in the Senate to set up a congressional commission that failed when seven Republican co-sponsors of the legislation ended up voting against the bill.

Based on this very recent history alone, why did anyone think this latest attempt had a chance in hell of being successful? Had the economic or political pressures become more encouraging? Had the polls that for so long have shown Americans not wanting the specific spending cuts or revenue increases that would be needed for a substantial deficit reduction effort suddenly changed?

No, and definitely no.  In fact, in retrospect, the idea that 12 elected officials who were appointed by their respective political leadership to protect their party's position were going to do something different on the deficit from all those who came before them is utterly ludicrous.

Several points important for the future of deficit reduction efforts need to be made as the finger pointing gets underway.

1.  This was the budget version of a BRAC commission some have been insisting was needed to reduce the deficit...and it failed.

For years I have been asked why we don't just set up a budget commission with rules like the base realignment and closure commissions of the past that have always been taken as the model for a successful commission.  For the record, we had that here and it didn't work.  Had the hardly-super committee actually recommended a deficit reduction plan, it would have used a BRAC-like process: the bill could not have been amended by Congress and would have been considered in both Houses on a simple up-or-down vote.  No filibusters allowed.

BRAC was created to do something very different from the super committee: it was designed to determine which military facilities should be closed after Congress decided that some weren't needed. By contrast, the super committee had to do the equivalent of determining whether any bases should be closed at all.  That was a far more open-ended and considerably more difficult task than anything any BRAC was ever asked to do.

2.  I'm willing the bet the committee wishes it had never been named "super."

All the nickname did was raise expectations about what the committee could and would do.  At various points over the past three months it supposedly was going to reduce the deficit, stimulate the economy, reform the tax code, extend expiring tax provisions, extend the payroll tax cut, etc. because it was "super" and could do anything in a single bound far faster than those of mortal men (and women).  As I posted back in September, this was a super committee and not a super hero and it was always absurd to think that it could do all of those things when any one of them by themselves would have been close to impossible.

3.  Grover Norquist was the super committee's Lex Luthor.

All the reports that committee Republicans were moving away from the no tax increase pledge turned out to be completely incorrect, utterly misleading, and very likely were more wishful thinking than anything else.

4.  "Committee" may have been as inappropriate as "super."

I've obviously had a great deal of fun by referring to the committee as "anything-but-super" and with other similar jibes, but over the past few days it has become increasingly clear that the word "committee" was at least as inappropriate as super.  A number of reports confirmed that the committee was really nothing more than a negotiation between six Democrats and six  Republicans, none of which could assume that they had the ability to make a deal on behalf of his or her full caucus.

5.  2012 will be the year of trying to avoid the sequester.

Attempts to avoid the sequester that will now occur in January 2013 actually will begin in about three weeks when the latest fiscal 2012 continuing resolution will expire.  I expect a number of members to refuse to vote for it unless it reduces or eliminates the military spending part of the across-the-board cut.

It will then continue when the president submits his fiscal 2013 budget in February and when one or both houses considers a budget resolution in the spring.  I expect the gang of six to reconstitute itself in the Senate specifically to come up with an alternate way to reduce the deficit.

I also expect the sequester to become a campaign issue and, therefore, for nothing to be decided until a lame duck session after the election.

Failure?

The goal of the Super Committee was to cut at least $1.2 trillion over a decade. Instead we'll get automatic cuts of $1.2 trillion over a decade.

Same amount of reductions either way.

It's a failure because it's insane to focus on the deficit at a time when jobs and slow growth are the real problem. Treasury prices are near record highs, which shows the market doesn't view the deficit as a serious problem.

Austerity is contractionary. We need expansion now.

If you really care about the deficit, let the Bush tax cuts expire. That will do much much more to reduce the deficit. The amounts are much larger and the harm to growth should be much less than from spending cuts under current conditions.


Abject failure

You have either not been paying attention or else you also believe in Santa Claus, the Easter Bunny, and the proposition that just because Congress has done the Doc Fix and the AMT Tweak every year doesn't mean they will do it again this year. Sequestration is a very, very low probability outcome given the alternatives. But if it comes to pass, I could be persuaded to help you scrape the reindeer poop off your shingles in 2013.


The market has nothing to do

The market has nothing to do with the price of Treasuries. Those are completely price-controlled - along the entire yield curve - by Uncle Ben and his money machinery at the Fed.

When the Fed stops monetizing the debt, the US will go through a currency crisis that will hit so fast your head will spin. No rational (rational meaning someone who is actually responsible for the consequences of their investment and doesn't have a bailout guarantee from government) person in their right mind is ever going to buy any Treasury bond of longer duration than 5-10 years - and getting shorter by the year. The T-bond "market" is now nothing more than the condo-flippers of a few years ago.


Deficit reduction

The main problem with this approach was the nonsensical idea that the federal budget exists in a vacuum, and that you can achieve significant reductions in the deficit through direct spending cuts and tax increases in the aftermath of a very deep recession.

There won't be any meaningful reduction in the deficit until the economy is back on track with sustained annual GDP growth in the 3-4% range combined with an unemployment rate in the 5-6% range. Getting the economy on that trajectory will require running BIGGER deficits in the short term. Until then, trying to cut the deficit through spending cuts and tax increases will just make the deficit worse.


Stan, You write: BRAC was

Stan,

You write:
BRAC was created to do something very different from the super committee: it was designed to determine which military facilities should be closed after Congress decided that some weren't needed. By contrast, the super committee had to do the equivalent of determining whether any bases should be closed at all.

That supposed contrast you draw seems largely specious. In both the case of BRAC and the "super committee", there was consensus in Congress that something had to be done (base closers; deficit-"reduction") but a group was tasked with offering a plan with the particulars to be fast-tracked through Congress.

Yes, BRAC's objective was to come up with a plan -- designating which military facilities would be closed -- that would then be fast-tracked in Congress, and yes, that framework was set up in the context of consensus that some bases should be closed, but recognizing that the regular political process was inadequate to sort out and enact the particulars, because many individual members of Congress would defend bases important to them, respectively -- mainly because the bases were in their states/district/region, and perhaps to some degree also due to preferences of one branch of the military over others (e.g., Navy over Army). So there was a broadly accepted goal of closing some bases, but the commission's job was to determine which ones -- which facilities in which locations belonging to which branches of the military.

Similarly, there is broad consensus in Congress that we should reduce projected deficits (at least vs. CBO's Alternative Fiscal Scenario), but the regular political process seems inadequate to sort out and enact the particulars -- cuts in projected spending and/or increases in revenue (as well as particulars within either/each), due to preferences of individual members of Congress. So, as with BRAC, the "super committee" was to develop a plan with the particulars to be fast-tracked in Congress. Just as BRAC had to choose how many closures across the different branches of the military and different locations of facilities (among other characteristics), the "super committee" was to choose among options for deficit-"reduction" on the tax and/or revenue sides.

You seem to think these two entities are fundamentally different because there isn't consensus on whether or not there should be ANY sacrifice on the tax side (although Toomey's plan did seem to offer that vs. the AFS baseline the committee was using, which isn't to say it would have passed the House), but how is that fundamentally different from lack of consensus that there should be any sacrifice by the Marines (or other particular branch) or in Florida (or other particular state/region/district)? In both cases the goal is there and consensus on it exits: "reduce" deficits; close bases. And in both cases a group was tasked with choosing the particulars and putting forth a plan to be fast-tracked.


Hear, hear!

Amen, RueTheDay and foosion. You couldn't both be righter!

But some people would rather continue to hurt growth by laying off folk, especially federal, state and local government employees. Those folk COULD be doing productive work, as could the zillions of unemployed private sector workers. Instead of trying to employ them constructively, we ratchet down spending and damage any prospects of economic growth (or a smaller deficit). I don't know where we end this death spiral, makes no sense whatsoever.

I also fear that with increased burdens on federal agencies (e.g. E-Verify increased use is the responsibility of Social Security, yet no increased manpower) and with the craziness of long-term planning being impossible for federal agencies what with multiple CRs, we're headed for disasters similar to the loss of Japanese pension records in 1997.

Just absolutely NUTS and scary as hell. And I certainly have NO presidential candidates to vote for, I'm livid that Obama extended the Bush tax cuts and is constantly advocating austerity.

I've been reading about the blindness of Hoover and Coolidge during the early 1930's in William Manchester's book The Glory and the Dream. Certainly is reminscent of our current leaders and elite.


I don't understand why you

I don't understand why you think this is a failure.

Neither political party ever had any intention of doing anything other than finding an excuse to blame the other party for failure. Thus - failure was necessary and both political parties have won.

No one in DC will ever have any intention of cutting (or even slowing the growth of) spending - and as long as the US can issue debt, they don't give a rip about taxes or the future debt burden. There will be no spending cuts - hence the beltway wins.

Of course everyone outside DC loses but they are all still paying attention to the tools in the mass media who are still doing their job of pretending that the US is not really a kleptocracy nearing bankruptcy so everyone move along now and pay no attention. So realistically, the vast majority of the country which simply wants to live in delusion wins too.


American voters elected every

American voters elected every one of those members of Congress. And American voters will re-elect virtually all of them next November. The generic opinion of Congress doesn't matter at all in the US system of government, so we are destined for more of the same. Special committees won't work. Until American voters change, we are stewed.




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