Supercommittee failure would leave bad choices

Members of the Joint Select Committee on Deficit Reduction hold a public hearing on Capitol Hill in Washington, Wednesday, Oct. 26, 2011. From left are, Rep. Fred Upton, R-Mich., Co-Chair Rep. Jeb Hensarling, R-Texas, Co-Chair Sen. Patty Murray, D-Wash., Sen. Jon Kyl, R-Ariz., Sen. Max Baucus, D-Mont., Sen. Rob Portman, R-Ohio, Sen. John Kerry, D-Mass. / AP Photo

WASHINGTON - If the deficit-cutting supercommittee fails, Congress will face a crummy choice. Lawmakers can allow payroll tax cuts and jobless aid for millions to expire or they extend them and increase the nation's $15 trillion debt by at least $160 billion.

President Barack Obama and Democrats on the deficit panel want to use the committee's product to carry their jobs agenda. That includes cutting in half the 6.2 percent Social Security payroll tax and extending jobless benefits for people who have been unemployed for more than six months.

Also caught up in what promises to be a chaotic legislative dash for the exits next month is the need to pass legislation to prevent an almost 30 percent cut in Medicare payments to doctors. Several popular business tax breaks and relief from the alternative minimum tax also expire at year's end.

A debt plan from the supercommittee, it was hoped, would have served as a sturdy, filibuster-proof vehicle to tow all of these expiring provisions into law. But after months of negotiations, Republicans and Democrats were far apart on any possible compromise, and there was no indication of progress Saturday.

Failure by the committee would leave lawmakers little time to pick up the pieces. And there's no guarantee it all can get done, especially given the impact of those measures on the spiraling debt.

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Instead of cutting the deficit with a tough, bipartisan budget deal, Congress could pivot to spending enormous sums on expiring big-ticket policies.

If lawmakers rebel against the cost, as is possible, they would bear responsibility for allowing policies such as the payroll tax cut, enacted a year ago to help prop up the economy, to lapse.

Last year's extensions of jobless benefits and first-ever cut in the payroll tax were accomplished with borrowed money.

The 2 percent payroll tax cut expiring in December gave 121 million families a tax cut averaging $934 last year at a total cost of about $120 billion, according to the Tax Policy Center.

Obama wants to cut the payroll tax by another percentage point for workers at a total cost of $179 billion and reduce the employer share of the tax in half as well for most companies, which carries a $69 billion price tag.

"The notion of imposing a new payroll tax on people after Jan. 1 in the midst of this recession on working families is totally counterproductive," said Sen. Dick Durbin of Illinois, the No. 2 Democrat in the Senate.

Letting extended jobless assistance expire would mean that more than 6 million people would lose benefits averaging $296 a week next year, with 1.8 million cut off within a month.

Economist say those jobless benefits — up to 99 weeks of them in high unemployment states — are among the most effective way to stimulate the economy because unemployed people generally spend the money right away.

"We will have to address those issues," Durbin said.

Extending benefits to the long-term unemployed would cost almost $50 billion under Obama's plan. Preventing the Medicare payment cuts to doctors for an additional 18 months to two years would in all likelihood cost $26 billion to $32 billion more.

Lawmakers also had hoped to renew some tax breaks for business and prevent the alternative minimum tax from sticking more than 30 million taxpayers with higher tax bills. Those items could be addressed retroactively next year, but only increase the uncertainty among already nervous consumers and investors.

This time, Obama wants them to be paid for. But a move by Democrats to try to finance jobs measures with hundreds of billions of dollars in savings from drawing down troops in Iraq and Afghanistan has gotten a cold shoulder from top Republicans.

"I've made it pretty clear that those savings that are coming to us as a result of the wind-down of the war in Iraq and the war in Afghanistan should be banked, should not be used to offset other spending," said House Speaker John Boehner, R-Ohio. He did not address whether war savings could be used to extend expiring tax cuts.

Those savings are the natural result of national security strategies unrelated to the federal budget. Deficit hawks say tapping into them is simply an accounting gimmick.

"It's just the worst of all worlds if that were to happen," said Maya MacGuineas, president of the Committee for a Responsible Federal Budget.

But without the war money at their disposal, lawmakers simply can't pay for the payroll tax cut and jobless benefits. Liberals such as Durbin are fine with employing deficit financing, especially if the alternative is playing Scrooge just before the holidays.

"Many people will hate to go home for Christmas saying to the American people, `Merry Christmas, your payroll taxes go up 2 percent Jan. 1 and unemployment benefits are cut off."'

[Carly_EngageAmerica]

In order to reduce the deficit the Super Committee should have looked to take from all areas of federal government activity. If entitlements were to go untouched there would have been nothing left for younger generations and all other activities funded by the government would cease to exist. Had they changed the benefit formula for SS, it would have essentially eliminated the long-run funding gap and would have required no additional solvency tax. It also would have produced the most dramatic reduction in spending on benefits, equal to 23% of long-run spending under the current benefit formula. In addition, it would have retained the progressive nature of the benefit formula, but reduced the degree of progressivity relative to the current formula. Also, had they raised the retirement age, it would have reduced Social Security's unfunded obligations for retiree benefits to $6.3 trillion and required a solvency tax of 1.3% of taxable payroll. It would have resulted in the third-largest program, with about 87% of the current law spending. Moreover, though the distribution of net taxes would still have been progressive, of the four potential changes considered it would have reduced the degree of progressivity the most relative to current law (http://eng.am/sWDUJ8).

Reforms in several areas of Medicare could have been implemented that, if adopted, would have saved $9.4 trillion by 2035 when compared with Congressional Budget Office (CBO) baselines. The government should have implemented cost caps (approximately $5,500) on catastrophic illness. This would have reduced the use of secondary policies and decrease overutilization of medical resources. Also, the government needed to implement an additional premium on beneficiaries to cover deficits within the Hospitalization Insurance Program - it cannot receive funds from general government revenues to finance its deficits, and will be insolvent by 2020, according to the CBO. Furthermore, beneficiaries' contribution toward Part B of Medicare should have been increaseded gradually from 25% to 35% to reduce the fund's reliance on general tax revenues. The same policy should have been implemented for Part D of Medicare. Finally, benefits for the wealthiest recipients should have gradually been phased out (http://eng.am/uO83aB).

[josephp5]

I am glad that this "supercommittee" will fail.

They never considered all the possibilities for reducing the debt. There is a very easy way to completely reduce the debt and actually run a surplus, without cutting a dime from Social Security and Medicare.

It's called RAISING TAXES!

Allow the Bush tax cuts to expire as they were always supposed to. Eliminate the Percentage Depletion exemption used by oil companies to pay no tax despite record profits. Create a new tax bracket---45%---for taxable incomes over $1 million. Lift the Social Security tax threshold from $106,800 to $200,000. Tax capital gains as regular income.

PROBLEM SOLVED!!!

However, these proposals would require very rich people to have to pay a little bit more. For instance, CEOs that get paid in stock options and are currently paying only 15% would have to pay the same rates as taxicab drivers on their capital gains income.
o
So that is why we have something called a "supercommittee." It's purpose is to make cuts to things that poor people depend on, without angering rich campaign dnors with anything that might make them pay a little bit more.

[reality_sanity]

Actually raising taxes may not be required -- as the law stands the BUSH TAX cuts simply expire.

[Benji_Di]

There a re currently 70 members of Congress that label themselves as socialists-google the list. The Constitution is not compatible with socialism, therefore there isn't a compromise. Freedom loving people who think government is way too big aren't going to give the government more power in negotiations. Unfortunately the country will not begin to recover until conservatives are in charge. The choice will be clear: bankrupt the country with government borrowing .40 cents of every dollar, or live within our means. Seen Greece lately? Make the wrong choice and that's what we will get!

[josephp5]

Republicans evidently think the word "socialism" means "a government that provides social programs."

The purpose of Government is to provide for the people things that they could not do individually. Things like protect us from terrorists, provide education for our children, build roads, provide healthcare. People may disagree with the extent that Government should provide these things, but their existence does not mean the US is "socialist."

Socialism is something different. It is the idea that a country's assets are owned equally by all its citizens, and no one has the right to accumulate wealth. This has nothing to do with the whiners who complain that they are being "punished" by high taxes (even though tax rates are at a 70 year low).

Oh, and the Greece situation is nothing like the US situation. No one will lend Greece a dime, whereas the world is beating down our door trying to lend the US money. Interest rates are so low that borrowing money is practically free. Obviously, the free market investors of the world, free to make their own decisions, have decided that unlike Greece, the US is a great investment.

[Anotheryahoo]

Its sad as heck when we as a country are run by two parties who put their party and ideology before the country every single time. There is a solution and thats to vote every single one of them out and try again for a congress that can work for the good of the country.

It feels like we are being ran by children. not adults.

[Overruled1]

Are we seeing the beginning of an American civil war?
I think so.
The Occupy protests are just a sign of things to come.
Today we have peaceful protestors standing against the friendly forces of law and order.
Tomorrow I fear homeland security will assume too much power to fight the 99%...and begin a campaign of assassinations of local leaders as the mossad did to the Palestinian leadership over time.

Furthermore, I feel this was all predicted by Rand and others in secret meetings with political leaders and industrial captains of industry when they decided to move the American economy into a death spiral for the sake of profits.
We are as a people being herded like cows by those in power.
In other words, the super-committee is the death panel Palin described during the health insurance debates.

[josephp5]

Excellent point!

This "supercommittee" is in fact the embodiment of the "death panels" that Palin so viciously denounced during the health care debate!

[soap-suds]

Our present quagmire is the result of "bad choices" by the electorate. Why do people elect these "representatives" and then bark and howl about what they do; and, of course, it is not their people who are the problem?

[taylorsucram]

If you set fire to my house and then want me and my children to go hungry in order to pay for the fire to be put out, I'd say that you're being disingenuous! Let me put this another way...

FACTS: Republican President Ronald Reagan walked into the White House with a National Debt of $993 Billion Dollars. After 8 years he left the White House with a National Debt of $2.67 TRILLION DOLLARS, it was called "Voodoo Economics" then and nothing has changed. Republican President George W. Bush Jr. sneaked into the White House and increased the National Debt by $5.07 TRILLION DOLLARS. Supply-side "voodoo" economics is an immoral trick of thievery, designed for today's rich at the expense of the future and the poor. It hoodwinks many by offering the middle class some of the booty while the rich get the big tax cuts. The result of falling for this, is an out-of-control debt that scares us into staying in recession and will soon be used to kill social security (by cutting Social Security income via reduction of SSI Taxes)and Medicare, which the rich don't need and something they have had planned for decades. The average American Reads, Writes and Comprehends at an 8th Grade Level (the same as a 14 year old) that is why the "Dumbing Down of America" is finally complete. No sane, intelligent person would vote for individuals who campaign on, and promise to continue, the same policies that got us into this mess in the first place!No sane country would follow the policies of another country that caused World Wide Financial Crisis.

FACT: Republican President Dwight D. Eisenhower had a TOP TAX RATE OF 91% ON BILLIONAIRES & MILLIONAIRES. Further he warned us about the "Military-Industrial-Complex", we didn't listen. He took that money and built the INTERSTATE HIGHWAY the ELECTRICAL GRID and DAMS (infrastructure), then he turned around and built the finest Public School System in the free world. When Republicans asked him to lower taxes he stated ... "We cannot afford to reduce taxes and reduce income until we have in sight a program of expenditure that shows that the factors of income and outgo will be balanced." Eisenhower kept the national debt low and inflation near zero. The GOP destroyed it all for political gain, and you let them do it !!! Here is another fact that seems to elude those with an IQ of 98 ....

President Bush (a no tax Republican) increased U.S. Government spending by 88%
President Obama (trying to save America) increased U.S. Government spending by 7.2%
REFERENCE: http://www.gpoaccess.gov/usbudget/fy12/hist.htm

NOW DO YOU UNDERSTAND WHAT THE GOP IS DOING AND WHY YOU AND YOUR CHILDREN ARE PAYING FOR IT? QUIT BLAMING OBAMA FOR YOUR INATTENTION! RUN THESE GOP INCUMBENTS OUT-OF-TOWN AND SAVE AMERICA.

[jeannettelj]

Well said!!

[gep1955]

I heard that 305 mil Americans owe $47,000 each to pay off the $ 15 tril debt. That's misleading. If only half of wage earners even pay federal taxes, that works out to more like $141,000 per taxpayer. So if the supercommittee comes back with $1.2 tril saved over 10 years, as usual another government plan that doesn't do diddly squat bu the headlines will scream "we're saved"! Pathetic.

[ejr1953]

I don't see the automatic cuts in spending as a bad thing. It's probably the only way to get cuts in spending. I also won't be sad to see the Bush tax cuts go away. Maybe with both measures, we'll do the right thing an make some sacrifices for our kids & their kids, and get this budget deficit under control.

[mermera]

It's that mean ole tax payer making the fine people on the super-committee confused. How can the fine people on the super-committee, experts all on finely processed cow feed, come up with solutions to problems they created, doing things they said tax payers wanted, when the tax payers are saying that's more of that finely processed cow feed. Now, when the processed cow feed hits the fan, John Boehner is wailing and John Kerry starts quoting Martin Luther King's Dream Speech, we will hear the congress version of the problem... it's the taxpayers fault. Congress had nothing to do with the economic collapse, and further, the American bank system and Wall Street were blind sided by the catastrophic loss. Why, congress was just working up a new treaty to export some more of the jobs that are not available to American workers, to make things cheaper at the Wal Mart, except food and gas, oh yea housing is kind of a rub now but that's on the taxpayer. So, the Super-Committee will be a looking for some help to undo forty plus years of race pandering, vote buying, self-serving outright theft and legislated bigotry by, yes America, CONGRESS. But do listen for the shot over the bow that calls the American taxpayers a bunch of ungrateful, money grubbing, self serving, lying curs. Congress would know, definitely, congress would know.