News Column

With No Supercommittee Deal, Big Cuts Coming

November 22, 2011

Todd Spangler

Supercommittee Debt

In the end, the supercommittee couldn't save us. Congress' Joint Committee on Deficit Reduction -- called "the supercommittee" because of its broad authority to recommend new taxes and spending cuts to fix the federal government's growing spending beyond its means -- failed to reach a deal Monday, its self-imposed deadline.

The deadline, two days before its legal deadline, was intended to allow a detailed accounting before the presentation of a report Wednesday.

The committee failed because of politics -- the deep rift between Democrats and Republicans over the proper balance between spending cuts and tax increases. It was the same debate that led to creation of the joint committee.

With two House Republicans, Michigan was the only state with two members on the equally partisan 12-member panel. Rep. Dave Camp of Midland said the failure of the committee was "a serious disappointment," blaming Democrats for demanding too much in taxes. Rep. Fred Upton of St. Joseph said the committee was battling against "steep odds."

Now, the law enacted in August as part of a deal to increase the nation's debt limit triggers $1.2 trillion in across-the-board reductions, but those don't take effect until January 2013, ensuring they will loom over next year's presidential and congressional elections. President Barack Obama vowed to veto legislation that stalls those automatic cuts.

"We need to keep the pressure up to compromise," he said, calling on Congress to find a "balanced" plan to reduce the deficit by at least $1.2 trillion. "That's the job they promised to do. ... They still have a year to figure it out."As written, the law calls for about half of the across-the-board cuts to come from defense spending, a level not only Republicans have balked at but the Pentagon, the White House and Senate Armed Services Chairman Carl Levin, a Michigan Democrat, have said is too large. House Armed Services Chairman Howard P. (Buck) McKeon of California said he plans to propose legislation to block the $500-billion defense cut.

But avoiding the across-the-board cuts may be especially difficult because in the Senate, a super-majority of 60 votes is needed to pass contentious bills. Passing the supercommittee recommendation would have required a simple majority of 51 votes.

The remainder of the cuts will come from domestic programs, although the cuts to Medicare -- the government insurance program for elderly Americans -- is limited to 2%. Democrats will argue against such deep cuts to programs that could affect education, housing, community policing and more.

"I'm not surprised they didn't come to an agreement," said former Michigan Gov. Jim Blanchard, a Washington consultant and Democrat. "I think these guys just want to postpone everything until after the election."

Oakland County Executive L. Brooks Patterson, a Republican, was more blunt: "The whole goddamned Congress should be held up to scathing denunciation for their inability to deal with a $15-trillion deficit."

The problem was the same as at the outset: Democrats wanted Republicans to sign off on a deal that would bring more tax revenue into government coffers without demanding that tax cuts for wealthy people, put in place in 2001 and 2003, be extended beyond the end of next year.

Republicans wanted Democrats to move further on cutting spending and reforming Medicaid, Medicare and Social Security than they were willing to go.

Senate Majority Leader Harry Reid, D-Nev., said Republicans "relentlessly sought to end Medicare as we know it by privatizing the program." Republican House Speaker John Boehner, R-Ohio, said he will forge ahead with ways to cut government spending, signaling that little common ground was ultimately reached.

"For months, I have warned that depending solely on spending cuts to address the deficit, without restoring revenue, would fail to achieve real deficit reduction while endangering important commitments to American families and the national defense," Levin said. "Today's announcement brings us one step closer to that fate."

In both parties, members of Congress vowed to work to try to balance spending without destroying either important programs or putting the economy at further risk. But there were already concerns as the Dow Jones Industrial Average dropped nearly 250 points on Monday.

Effects of uncertainty

Lansing consultant John Truscott said the problem is not just with the potential reaction of the markets but business people and investors who are holding onto their money because of the uncertainty about tax and spending policies in Washington.

Some pundits have suggested that Democrats felt little urgency to reach a deal because the Bush-era tax cuts will disappear on their own at the end of next year without Congress doing anything.

But those rates are set to go up on middle-class voters, too, barring a change. Other decisions won't wait for next year and the November elections, either: A continuing resolution funding the government will expire Dec. 16, another funding bill will be needed.

Any extension of unemployment insurance will require congressional approval as will the yearly patch for the alternative minimum tax and an extension of the payroll tax cut, without which, the White House says, the average family making $50,000 a year could see its taxes go up $1,000 in the new year.

U.S. Sen. Debbie Stabenow, D-Mich., did manage to work out a bipartisan deal with the Republican-led House in her role as chair of the Senate Agriculture Committee. Their agreement -- sent to the supercommittee as way to cut $23 billion -- calls for ending the system of direct payments that subsidize farmers even when profits are up and instructs states to implement rules prohibiting lottery winners from receiving food assistance.

Leroy Fick, 59, of Auburn continued to receive food stamps after winning $2 million in the Michigan lottery last year.

Even though the agreement is now set aside, Stabenow said Monday it could form the basis of next year's farm bill.



Source: (c)2011 the Detroit Free Press. Distributed by MCT Information Services


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