Gridlock Ahead: Why the "Supercommittee" Is a Waste of Time

Last Updated Sep 13, 2011 2:31 PM EDT

Let the games begin. Members of the congressional "supercommittee" are meeting today on Capitol Hill in their first public hearing over how to reduce the federal deficit. This being Washington, blood will flow, lawmakers will strike poses and gridlock is a given. Here's a brief primer to help you keep up with the action:

What is the supercommittee? The bipartisan Joint Select Committee on Deficit Reduction is a 12-member panel formed as part of the August deal between Democrats and Republicans to raise the federal debt ceiling. It is tasked with cutting the deficit by at least $1.5 trillion over the next 10 years through government spending cuts and tax changes.

Who is on the panel? The supercommittee consists of six Democrats and six Republicans, with three members of each party coming from the Senate and three members of each side from the House. It is led by Sen. Patty Murray, D-Wash., and Rep. Jeb Hensarling, R-Texas.

When must the supercommittee act? It has until Nov. 23 to come up with a plan to cut the deficit. In reality, that requires members to reach a deal before that date so the Congressional Budget Office can officially estimate the savings.

What happens if the panel strikes out? If the supercommittee fails to find the $1.5 trillion in savings, or if Congress doesn't come up with at least $1.2 trillion in deficit-reduction measures by Dec. 23, then government spending cuts would automatically kick in starting in fiscal year 2013. If triggered, those reductions would come equally from defense and domestic spending programs. The unpopularity of those cuts is supposed to give members an incentive to agree on a deficit-reduction deal.

What are the negotiations likely to focus on? The same divisive issues that drove partisan conflict during the debt-ceiling fight. The Democrats on the panel generally support raising taxes or closing loopholes as a way to help close the deficit, while Republican members bitterly oppose such measures in favor of deeper spending cuts.

President Obama raised the stakes on Monday by proposing to pay for his $447 billion jobs plan by hiking taxes for upper-income Americans, oil companies, corporate jet-owners and private equity executives. Although most of those increases are unlikely to fly with Republicans on the supercom, it could strengthen the Democrats' hand in pushing for deeper defense cuts and in protecting entitlement programs, including Medicare. (By contrast, it seemingly weakens the chances that congressional Republicans will support parts of the White House's job plan.)

Pressure on the panel is also building outside Washington. A group of former lawmakers, prominent corporate executives and economists this week urged the supercom to go beyond its mandate of shrinking the deficit by $1.5 trillion and reduce it even more. That may sound good to deficit hawks. Still, it doesn't address exactly where Democrats and Republicans who remain at odds over fiscal matters can find those additional savings.

Will this help balance the nation's books? Probably not in the long run. Even if the supercommittee reaches consensus over how to lower the deficit, a $1.5 trillion reduction represents only a fraction of the $44 trillion the feds are expected to spend over the next decade. Over that time period, government spending is forecast to exceed tax receipts by nearly $4.7 trillion.

Are the supercommittee's efforts likely to help the economy? Advocates for deficit reduction will say that depends on what the panel decides to do. If changes to tax policy are off the table, then that will require a massive cut in federal outlays. But if Republicans accede to tax increases, that changes the equation and likely economic impact.

It pays to remember this, however: Mainstream economic theory dictates that running deficits is exactly what the government should do when private spending by consumers and businesses falls, as it has since the recession. Economists across the political spectrum warn that a large, near-term drop in government spending is almost certain to slow economic growth and harm job-creation.

The nation's fiscal situation is also less dire than commonly thought. Under current law, for instance, the CBO exepects the federal deficit to decline from 8.5 percent of GDP this year to 6.2 percent in 2012 and to just over 1 percent of GDP by 2021 -- regardless of what steps Congress takes.

So what's the upshot? The same political differences that brought the government to the verge of default earlier this summer are likely to obstruct the supercommittee. Worse, whatever members come up with probably won't do much to narrow the budget gap, while their recommendations could well hurt the wheezing U.S. economy. So warned CBO director Doug Elmendorf in his testimony today before the panel:

In addition, and particularly important given the current state of the economy, immediate spending cuts or tax increases would represent an added drag on the weak economic expansion.
More broadly, the renewed focus on deficit-reduction comes at a time when our political leaders have supposedly shifted their attention to where it belongs -- creating jobs. In this light, the panel's work is, at best, a distraction from the real work of reviving the economy. At worst, it's an exercise in futility.


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    Alain Sherter covers business and economic affairs for