Sometime today, the Republican and Democratic leaders of the 12-member congressional committee will announce they couldn't come together on a plan to cut the government debt by $1.2 trillion. The supercommittee was formed because the full Congress couldn't come up a similar plan before the U.S. had to either raise its debt ceiling or go into default. In that case Congress had no control over the deadline it faced. In this case Congress has total control over the deadline and whether or not anything happens once the deadline is past.
What is supposed to happen after that deadline is an automatic $1.2 trillion in budget cuts, with half coming from entitlements and half from the defense budget. But automatic isn't the same as immediate. The cuts won't kick in until the 2013 budget. Have they even finished the 2011 budget yet?
While President Obama and Congressional leaders have said they wouldn't pass any law which alters these cuts you'd have to be as credible as a Cubs fan in order to believe that. They will figure out a way to change all these cuts while not "technically" changing them at all. We are talking about the Maestros of Fudging here. These are people who have declared pizza a vegetable and say the money owed right now is now actually not going to be owed until next year. So they will weasel around with legislative language and hope that no one notices.
It's easy to see the committee's failure as the outcome both Democrats and Republicans were hoping for. Now each can go boast to their core constituencies, "We didn't compromise on what you wanted and prevented what you dreaded." If this were any other election year that would be a great boast to make. This year, though, neither core constituency is going to buy that. They are just going to see it for what it is: Yet another attempt not to make hard and essential decisions.
The Wall Street Journal said this about the politics of the committee's failure:
But the outcome could create a political opening for Mr. Obama, bolstering a presidential campaign strategy of running against an ostensibly incompetent Congress.
Ostensibly incompetent? Guys, you don't have to say alleged when say the earth moves around the sun.
While the political impact of this piece of idiocy won't be clear until late next year, other impacts will come a lot sooner. Expect further downgrading of the U.S. credit rating. Under normal circumstances this would cost us more money, but right now investors are so scared of defaults they will buy anything marked U.S. debt. Let us all hope they never notice exactly how shaky U.S. finances really are.