POLITICS OCTOBER 26, 2011
Everybody agrees that the bipartisan deficit super committee had better hurry up and strike a deal to cut the federal budget by $1.2 trillion so it can meet its November 23 deadline. If it doesn’t, then all hell will break loose. Except it won’t.
You may have lost track of the deficit story after Congress and President Obama averted catastrophe at the end of July by agreeing to raise the debt ceiling. Perhaps I can help. In exchange for letting Obama pay the country’s bills, congressional Republicans imposed annual caps on “discretionary” spending (i.e., spending Congress appropriates, as opposed to “entitlements” like Social Security and Medicare that Congress spends automatically according to a pre-set formula). The caps are supposed to save $900 billion over the next ten years. But probably they’ll be repealed after a year or two (or altered to apply to entitlements), because the discretionary part of the budget is hard to cut: Discretionary spending represents only about one-third of the federal budget; it’s already been cut a lot in the past, because reducing entitlement spending is politically unpopular; and the majority of it goes to defense, which the GOP hates to whack.
Republicans also exacted another price for raising the debt ceiling. They created a twelve-person joint “super committee,” equally divided between Democrats and Republicans. It was charged with finding an additional $1.2 trillion in deficit reduction over ten years. The committee can do this any way it likes, but it must propose something by November 23 (that’s the day before Thanksgiving) to allow Congress time to approve it on an expedited schedule. If the committee doesn’t reach agreement, or if Congress doesn’t approve its package, then automatic across-the-board cuts (“sequestration”) will occur to meet the $1.2 trillion ten-year target. Since nobody wants this to happen—Republicans because they don’t want indiscriminate defense cuts; Democrats because they don’t want indiscriminate cuts, period—the sequestration doomsday machine will frighten the super committee into reaching an agreement.
That’s the theory, anyway. But stop-me-before-I-kill-again austerity has been tried before, and it didn’t work. The 1985 Gramm-Rudman-Hollings law introduced sequestration as a fallback if annual deficit-reduction targets weren’t met, but only one full sequestration ever took place. That was immediately after the bill became law, before legislators figured out they didn’t need to take it seriously. In subsequent years, Congress and the White House used various budget gimmicks to avoid sequestration. Gramm-Rudman’s targets were forecast rather than actual deficit reductions, and the law imposed no penalty for forecasting wrong, as Washington did again and again. It was like putting a lock on a cookie jar and then leaving the key on the kitchen table. By the time Gramm-Rudman was scuttled, the budget deficit was $8 billion higher than it had been when the law was first enacted.
Gramm-Rudman was replaced in 1990 with prearranged limits on annual appropriations and a pay-as-you-go (“PAYGO”) requirement that any future tax cut or entitlement increase be matched to an spending cut or revenue increase. This worked better because the deficit-reduction details got spelled out in advance (and because during the years it worked, 1990 to 1997, there were two substantial tax increases). Still, as with Gramm-Rudman-Hollings, PAYGO sequesters, on the few occasions they were triggered, got quickly reversed. It didn’t matter because, by the decade’s end, the deficit had disappeared. PAYGO and the spending ceilings expired in 2002.
Sequestration is one of many automatic legislative triggers that have been tried and failed over the years. The 1973 War Powers Resolution gave the president a 90-day deadline to get Congress to approve any troop commitment to armed conflict. But Congress thereafter avoided enforcing the deadline because it didn’t want to take responsibility for supporting or opposing any wars. The 1978 Humphrey-Hawkins Full Employment Act supposedly encouraged Congress to create a government jobs program if the unemployment rate failed to drop below 4 percent within five years. By 1983, unemployment was nearly 11 percent but Congress did nothing. One trigger that worked was in the 1990 Defense Base Closure and Realignment Act, which gave Congress 45 days to pass a joint resolution to prevent any military base closings recommended by a special commission. But most members of Congress wanted to close unneeded bases.
Today’s sequestration procedure for the super committee has, if anything, roomier loopholes than earlier laws. Where Gramm-Rudman and PAYGO sequestors could be undone with followup spending bills enacted a few weeks later, super committee sequestors can be undone years after they’re enacted, because cuts are made up to a decade before money is due to go out the door. Even the short-term sequestration threat is slight. Should the super committee display empty pockets come November 23, sequestration will begin not in 2011, or even in 2012, but rather in January 2013, two months after an election that will surely alter, one way or another, the power relationship between Democrats and Republicans. By then we’ll have a better idea whether the economy has recovered sufficiently to absorb massive cuts in government spending. If it hasn’t, then allowing the cuts to go through would be insane.
Granted, there are external considerations. If the super committee does nothing, then Standard & Poor’s (S&P) might further lower its U.S. credit rating, or the other two major rating agencies might weigh in. But surely all three noticed that S&P’s August downgrade was a fiasco. S&P was shown to have committed an embarrassing math error, and, after the downgrade, Treasuries were actually in greater demand. “The markets don’t expect a deal,” says James Horney, a onetime Senate budget committee staffer who now works for the Center on Budget and Policy Priorities. A punt “will be greeted with a shrug at best.”
It’s unlikely, Horney says, that any super committee deal struck in November would be one worth making. The Republicans are fanatically intransigent about raising taxes. Every time the Democrats give ground on this issue the GOP becomes more intransigent, even though polls now show that Republican voters favor a tax increase. Hold the line and eventually congressional Republicans might compromise. But it can happen only if the Democrats don’t conciliate.
Timothy Noah is a senior editor at The New Republic. This article appeared in the November 17, 2011, issue of the magazine.