JONATHAN COHN NOVEMBER 18, 2011
The media narrative on the super-committee is finally starting to change, as writers realize that nothing terrible will happen if, as seems likely, the super-committee fails to make recommendations on deficit reduction. I'm happy for my colleague Tim Noah, who was slowly being driven mad by what he was reading in the papers. More important, I'm happy for all of the people struggling to find jobs or pay their bills. The super-committee has turned into a dangerous distraction from the conversation we should be having right now, about how to boost employment in the short-term even as we work on reducing deficits in the long-term.
But as we move from fretting over super-committee failure to analyzing it, assuming there's no last-minute deal, here are some critical points to keep in mind.
First, super-committee failure does not mean we’ve blown a chance to reduce the deficit. On the contrary, the immediate result of super-committee failure is to “pull the trigger”: That is, the clock will start ticking down to January 1, 2013, at which point automatic spending cuts of $1.5 trillion will take effect. Yes, Congress may decide to rescind those cuts. But it will have to act in order to do so – and the president will have to agree. The status quo is for those cuts to take place.
Granted, even those cuts are just a down-payment on what we should be doing about the deficit in the long term. But, as Greg Sargent keeps reminding everybody, reducing the deficit in the long-term is going to require something Republicans say they won’t consider: New revenue. It’s that strident opposition to new taxes that has made compromise impossible.
But aren't Democrats ducking some hard decisions too? Sure. It's not possible to achieve fiscal balance, which is not the same as a balanced budget per se, without higher taxes on middle incomes, which Democrats haven't supported, as well as more aggressive control of health care costs. But Democrats have been far more honest and reasonable about this than the Republicans. After all, they enacted the Affordable Care Act, which will start the process of controlling health care costs -- and in a way that preserves core commitments of Medicare and Medicaid. Republicans responded, and continue to respond, to this effort with grotesque demagoguery about what the law will actually do.
And this pattern is an old story, as Paul Krugman reminds us today. It may seem like ancient history now, but in the late 1990s the federal budget was actually in surplus. The strong economy had a lot to do with those surpluses, but so did a series of balanced efforts at deficit reduction, dating all the way back to the administration of President George H.W. Bush -- who famously went back on his "no new taxes" pledge in order to help shore up the federal government's finances.
But Bush became a pariah within his own party for signing that deal. And when his son took office, eight years later, he insisted on squandering those surpluses on tax cuts for the wealthy – in effect, destroying the good work that had come before. Given that history, Democrats would be fools to offer huge concessions now. It'd be bad for them and, more important, it'd be bad for the country.