A deficit supercommittee progress report
Is the Congress’ deficit super committee making progress? That depends on your definition of progress, I suppose.
The good news is that Republicans are increasingly uttering the “t” word, suggesting they might be willing to include some tax increases in a deficit reduction plan. The other good news is that Democrats reportedly are getting more specific about cuts in federal spending.
But before you start doing backflips of joy, keep a few things in mind:
To start, few outside of the committee (including me) have actually seen these proposals. Instead, we have mostly been shown other people’s characterizations of what they say. It is hard to make many judgments based on what some guy says about what some guy said.
Based on what we do know, however, both sides are playing big time budget baseline games. When they talk taxes, Republicans start by assuming the 2001/2003/2010 tax cuts will all be extended indefinitely. From there, they talk about cutting rates across the board and reducing tax preferences (perhaps with some cap on these breaks). All of this, it is reported, would boost revenue by a few hundred billion dollars over 10 years.
Sounds promising. But by starting by extending the Bush era tax cuts, the Rs would reduce revenues by $4 trillion compared to what would happen if Congress simply lets them expire as scheduled a year from now. So, Republicans would add $4 trillion to the deficit before cutting a paltry $200-$300 billion. In anyplace but Washington this would add up to another $3.7 or $3.8 trillion in red ink. Here, it counts as deficit reduction. Worse, even those dollars appear to result from presumed economic growth rather than policy changes. The wonders of dynamic scoring!
Democrats are playing their own games. While Politico reports this morning that they are proposing $400 billion in Medicare and Medicaid cuts (most of which would come out of the hides of doctors, hospitals, nursing homes, and other providers), the Dems also start by assuming a fix to the ongoing battle over Medicare reimbursements to physicians. Straightening out this mess could cost as much as $300 billion over the next 10 years. The Ds do say they’d pay for the fix—but with money from the drawdown of troops from Iraq and Afghanistan. This money is fiscal pixie dust, since the troops are already coming home and those funds were never going to be spent.
Budget experts tell me the committee has maximum flexibility to play with these baselines. It can mix and match or even make up its own. “They have all the flexibility in the world,” says Jim Horney, a long-time senior Senate Budget Committee aide.
So far, then, what we have is posturing. With public confidence in Congress sunk to the single digits, most lawmakers of both parties want to make it look like they are bargaining in good faith. Thus, Democrats propose mostly vaporous spending cuts knowing full well Republicans won’t accept their offer. And Rs offer fantasy tax increases, fully confident in the knowledge that Democrats won’t take their deal either.
This performance will go on a while longer. After all, today is only Nov. 10th and the super committee’s deadline for action is not until at least Thanksgiving. Do not believe lawmakers when they say they must have a deal this week in order to finish by Turkey Day. This is a bit like saying that in order to have dinner for the family in two weeks, you must buy your bird today. One thing about turkeys—you can always find one when you need it.
If lawmakers are aiming for Nov. 24th, there will be no plan until Nov. 23rd (and keep in mind that even that date is squishy–the only meaningful deadline requires Congress to vote on a deficit plan by Dec. 23).
The only real good news from all of this is that the pols are still talking. But don’t get too wound up about the specific proposals that are changing hands these days. It is still early.
