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Facing the Consequences of the Fall of the Supercommittee

Nov 28, 2011

By Joseph J. Schatz, CQ Staff

The next time Congress makes a serious run at reducing the deficit, sometime after the 2012 presidential election, it seems a safe bet that lawmakers won’t be creating a “supercommittee.”

While congressional leaders created the Joint Select Committee on Deficit Reduction four months ago with a mandate of trimming at least $1.2 trillion from the budget, it was always unclear just how invested members were in an actual deal. At times, it felt as if the panel’s talks were occurring on dual tracks, with serious negotiation by lawmakers and top staff happening in parallel with aggressive and nasty messaging operations by spin doctors and party higher-ups.

The process was pervaded by skepticism and a lack of trust about how much support members in either party could ultimately deliver. Democrats blamed Republicans for their intransigence on extending the Bush-era tax cuts, and Republicans said Democrats were never serious about cutting entitlement spending without major tax hikes.

Even with the special authorities that freed it from the normal lawmaking obstacles, and facing the consequences of automatic budget cuts in 2013, the panel couldn’t overcome the fundamental polarization of the parties and the chasm between their fiscal priorities.

As a result, its failure to strike a budget-cutting deal, made official by a meek joint statement released after U.S. stock markets closed November 21, means that instead of producing a December full of climactic budget votes, the committee’s months of work may have simply aggravated political wounds at the worst possible time, as Congress confronts both another round of critical decisions and a bitter election cycle.

So the deficit committee may be out of business. But its conflicts will live on, possibly more inflamed than before, reinforcing the public perception that Congress is hopelessly dysfunctional.

“That will define this next year, I believe, in this country,” said Senator John Kerry (D-MA), a panel member, after he led last-minute discussions aimed at reaching a deal on taxes. “This fight just begins, because now, we’re going to hold people accountable.”

“The failure of the supercommittee means it is time for the real committee — Congress — to act. Congress cannot delegate hard decisions any longer,” added Senator Tom Coburn (R-OK), a deficit hawk who was not part of the talks.

But those decisions will continue to be deferred, and “failure” is in the eye of the beholder, which is one of the main reasons that the committee folded up its tent without reaching a deal.

As the deliberations dragged on, many interest groups on all sides of the ideological spectrum began to realize that the consequences of coming up short — automatic budget cuts 13 months from now — actually weren’t so bad. And they certainly weren’t severe enough to force either side to give ground on the issue that looms even larger: the expiration of the Bush-era tax cuts at the end of 2012.

Moreover, while the committee failed, the law, so far, has worked. The stalemate may put in place an even stronger measure of deficit reduction: $1.2 trillion in automatic cuts that will occur unless undone by Congress and the president. That's more than might have been possible otherwise. It also sets up a broader, more urgent, debate next year.

That’s why, as the clock ticked down to the committee’s November 23 deadline, there was little of the urgency that surrounded the August debt-ceiling debate that led to the creation of the committee, or the previous spending showdowns that characterized the 112th Congress.

Cognitive Dissonance

The committee was set up as a way to end the debt-ceiling crisis and to try, yet again, to spur a long-term deficit deal that previous negotiators had failed to reach. The trigger of automatic budget cuts in 2013, equally apportioned to defense and non-defense, was designed to keep both sides at the table. At first, many members urged the committee to “go big.”

A large deal would have had political benefits for President Obama, it seemed, as well as House Speaker John Boehner (R-OH). Boehner was perhaps the group’s greatest champion, at least in public. He warned members that the threat of a $1.2 trillion automatic cut over 10 years was very real and hard to alter. The only way to ensure that the Pentagon did not get hit by major cuts in 2012, the speaker said, was to strike a deal.

Boehner, of course, had tried twice to negotiate his own “grand bargain” with Obama and had failed both times, even after he put $800 billion in tax revenue on the table in return for major entitlement cuts and a tax code overhaul that would lower marginal rates.

Senate Majority Leader Harry Reid (D-NV) came up with the idea for the committee but has never been sold on the kind of grand-bargain approach touted by the Senate’s “Gang of Six” and its supporters, which would have ceded ground on Medicare, Medicaid and Social Security.

But plenty of vulnerable Democratic incumbents in his caucus were sold. Now, instead of voting for a major deficit-reduction package, they’re more likely to face election-year pressure from Republicans to roll back the automatic cuts on defense spending. Obama has vowed to veto any such move.

The fact is that the committee did engage in some substantive negotiations on issues: namely, the parameters of a potential overhaul of the tax code. Several members of the joint committee — among them House Ways and Means Chairman Dave Camp (R-MI), Senator Patrick J. Toomey (R-PA), Senate Finance Chairman Max Baucus (D-MT) and Kerry — talked intensely about how an overhaul might be achieved.

But even at the moments when progress appeared greatest, there was a kind of political cognitive dissonance. When Democrats put hundreds of billions of dollars in entitlement cuts on the table, Republicans dismissed it derisively.

When Toomey made the first GOP concession on the revenue issue, offering to increase taxes by $300 billion if Congress reduced tax rates and engaging Baucus in discussions, Senate Majority Whip Richard Durbin (D-IL) called it a “breakthrough.”

Yet other Democratic lawmakers and staff members fought back furiously in public, insisting that Baucus would be party to no such deal and calling it a Republican smoke screen designed to avert blame for a breakdown in the negotiations.

It was a familiar message pushed by party leaders throughout the deficit committee process: We won’t compromise, because we don’t believe the other side is negotiating in good faith. As a result, it remains unclear whether Democrats would have ultimately resisted any GOP offer, no matter how high the proposed tax hike, or whether Republicans would have always demanded more on entitlements than Democrats could reasonably give up.

Indeed, even as Boehner pushed for a deal, the tone coming from Senate Minority Leader Mitch McConnell (R-KY) was markedly different. Months earlier, McConnell, worried that a first-ever government default would ruin the GOP brand, was the man at the center of the debt-ceiling deal with Obama. But the Kentucky Republican, who aspires to be majority leader in 2013 and who famously said last year that his top priority is making Obama a one-term president, kept his distance this time around, wielding his influence from the sidelines.

He insisted throughout the process that he wanted “an outcome” and said early on that “failure is not an option.” But by early November, McConnell was far from sanguine.

Publicly, he accused the White House of rooting for an implosion, saying a bipartisan deal “steps on the storyline that they’ve been peddling, which is ‘you can’t do anything with Republicans in Congress.’” Privately, he appeared to view the price of any deal as too high for GOP interests.

McConnell, says a Republican aide familiar with the talks, saw that Democrats would demand what many conservatives view as major tax increases — meaning an expiration of the 2001 and 2003 tax cuts for the wealthiest Americans. “He was more realistic about what the Democrats were going to ask for,” the aide says.

In the end, Obama gets no bragging rights, although he also may avoid a share of the blame. The president, who is still demanding that any major deal include a mix of tax increases and spending cuts, also kept his distance, putting forth his own ideas in September and then traveling to Asia just when negotiations got heated. After a debt-ceiling debate that dragged Obama’s approval ratings into the cellar, the White House was wary of engaging, focusing instead on his job creation agenda.

Whatever their differences, House and Senate Republicans on the committee stuck together. There would be no conservatives supporting a Democratic deal, or vice versa, even as Camp and Rep. Chris Van Hollen (D-MD) maintained conversations on taxes, or as Kerry and Senator Rob Portman (R-OH) negotiated in a silent Capitol on the Saturday before the deadline.

Finally, as once-promising negotiations subsided, the reality set in among many observers that these lawmakers were handpicked by their party leaders for a reason. They were not going rogue.

The Myth of Special Committees

In that way, the deficit committee’s deliberations gave lie to the idea that if only Congress were more streamlined, it would be easier to get bipartisan agreements on contentious national issues, such as deficit reduction, energy policy and health care.

That idea had taken on almost mythical status in recent years as Congress, unable to agree on long-term deficit reduction measures, set up powerful commissions and supercommittees, such as the one tasked with forcing military base closures. In his first year in office, Obama bowed to pressure from moderates and appointed an outside fiscal commission, including some members of Congress, by executive order, but the group did not garner the majority needed to send legislation to the House and Senate floors.

But somehow, the joint deficit committee, lodged within the very institution it was designed to circumvent, was going to break through. In an age in which it takes 60 votes to get anything of consequence done in the Senate, and in which the House leadership generally rules with an iron fist, the deficit committee was thought capable of defying the gridlock.

Leaders of both parties, particularly in the Senate, where Reid and McConnell came up with the idea of the committee, agreed to give up their normal prerogatives. If the committee produced an agreement, it would be guaranteed votes, with no amendments, on the House and Senate floors by a date certain. The House leadership couldn’t bottle up the bill, and no senator could filibuster it.

The makeup of the committee, however, mirrored the makeup of Congress as a whole. And even those political incentives couldn’t push the two parties to compromise.

“The No. 1 lesson here is that the polarization is so extreme” that even getting simple majorities is impossible, says Sarah Binder, a political science professor at George Washington University and a senior fellow at the Brookings Institution. “Even setting aside the rules, they were nowhere close to coming to an agreement.”

Binder says that, somewhat perversely, the fact that deficit committee legislation could not be blocked may have raised the stakes for the committee too high. There was no filibuster to hide behind.

Eric Ueland, who worked as chief of staff to Tennessee Republican and former Senate Majority Leader Bill Frist and who is now a lobbyist, says the length of time before the sequester takes effect probably diminished the impetus for a deal.

The automatic spending cuts in the budget deals of the 1980s and 1990s “always had a potential spending cut right behind it if you blew the deficit target,” Ueland says. “That’s a significant factor in the post-game analysis.”

Indeed, while the threat of sequester was originally seen as a way to prod the two sides toward an agreement, it soon came to be seen as a fail-safe that would soothe the bond markets and ensure that one way or another, the U.S. government would be seen as making good on its promise of $1.2 trillion in deficit reduction.

Many liberal groups saw failure as a reprieve from certain, and immediate, cuts. “Today’s announcement that the so-called supercommittee could not reach agreement is a victory for democracy and for the American people — the 99 percent over the 1 percent,” said Nancy Altman, co-chairwoman of the Strengthen Social Security Campaign. “An end run around the will of the people has been prevented.”

Draconian Cuts May Be in store for 2013

Some Republicans, particularly tea party freshmen, saw the prospect of defense cuts a year from now as a reasonable risk to take to avoid tax hikes. “Maybe sequestration is our only way we will get any kind of cuts,” said Sen. Rand Paul of Kentucky on CNN on Nov. 19.

The deficit committee’s failure has opened up a new front in the 2012 campaign. Republicans are expected to push efforts in the coming year to eliminate or blunt the cuts to the Pentagon — an issue that will put vulnerable Democrats on the spot. More than likely, Republicans will propose substituting more than $500 billion in cuts to programs such as farm subsidies and federal worker pensions, as well as user fees — a package they proposed to Democrats as their last-ditch offer Nov. 17. Democrats rejected it because it contained only $3 billion in tax revenues, hardly the balanced package they were insisting upon.

McConnell is seizing on the issue already. “The good news is that even without an agreement, $1.2 trillion will still be cut from the deficit,” he said after the committee’s efforts died. “Now it falls on the president to ensure that the defense cuts he insisted upon do not undermine national security, as Defense Secretary Leon Panetta has warned.”

Liberals have made clear their response: Taking military cuts off the table will require tax increases, and Republicans continue to side with the wealthiest taxpayers. “Policy makers who want to shield the Pentagon need to step up to the table and agree to raise revenue to help pay for it,” said Robert Greenstein of the Center on Budget and Policy Priorities in a November 21 memo.

President Obama, moreover, has vowed to veto any attempt to undo the sequester. And many party leaders would rather have that debate on the campaign trail, and in election year votes, than in the supercommittee. The deficit panel breakup has left several issues on the table for December, including the soon-to-expire payroll tax cut and benefits for the long-term unemployed. These issues could produce yet another partisan flare-up before the end of the year.

The committee’s failure also guarantees that the debt ceiling will increase no more than an additional $1.2 trillion, as opposed to $1.5 trillion, the next time the Treasury Department runs up against its borrowing limit. Democrats are hoping that’s enough to satisfy the government’s needs through the 2012 election.

And then, as 2012 ends and 2013 begins, the Bush-era tax cuts are slated to expire and the sequester is scheduled to kick in. More deadlines will loom no matter who has won the presidency. So even as many lawmakers call the deficit committee’s failure a “missed opportunity,” it’s also a political opportunity.

Alan K. Ota contributed to this story.

Source: CQ Weekly

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