Tax Analysts Blog

The Smart Money Says Deadlock

Posted on Nov 16, 2011

In politics, the smart money is always cynical. It bets on inertia, not change; on symbols, not substance. Hope? Progress? Suckers' bets.

The smart money isn't always right, but when it comes to the so-called supercommittee, it's made a safe bet. With a week to go, the panel seems unlikely to reach any sort of deal. But it's even more unlikely to reach a meaningful one.

It never ceases to amaze me how much faith people put in these special panels/commissions/committees/conclaves. Credulous optimists routinely cite a variety of successful precedents, notably the Greenspan Social Security commission of the early 1980s.

But the track record for special budget commissions is not actually encouraging. As reporter Catherine Rampell pointed out in the New York Times back in August:

    In the last six decades, Washington has assembled more than a dozen blue-ribbon panels to grapple with fiscal problems. These include the 1947-49 Hoover Commission, the 1982-84 Grace Commission and of course most recently, the Simpson-Bowles Commission, a bipartisan panel President Obama created by executive order just last year that included 12 sitting members of Congress ...The panels were often devised as a way to give political cover to policy makers so they could make unpopular changes to things like entitlements and tax rates. In most cases, though, Congress ignored the proposals or deferred action.

Even the Greenspan panel was largely unsuccessful. Poised for failure, it was rescued only by the intervention of non-panelists, including President Ronald Reagan and Democratic leaders of the House of Representatives.

Why do supercommittees fail? The explanation begins with Thorndike's First Law of fiscal politics: There is no such thing as political cover. Tricks and procedural gimmicks can offer a little protection for a little while. But ultimately, unpopular policies will stay unpopular long after that notional cover has disappeared.

And it will disappear, because gimmicks don't change anything. Real progress comes only when politicians actually want real progress. With the supercommittee, no such secret consensus exists. I think it's safe to say that most politicians in both parties would prefer to continue the deficit fight, since that's the route to holding/achieving power.

Which brings us to Thorndike's Second Law: there is no short cut for democracy. The nation's fiscal future (both short-term and long-term) has been bungled by a bunch of faithless, opportunistic, unreliable, self-interested politicians. And if we're ever going to fix the mess we're in (today's mess, which demands more stimulus, and tomorrow's, which demands genuine austerity), then it will be these same politicians who will get the work done.

Meaningful reform on the fiscal front will happen when it has to, not when some supercommittee decides that it should. And right now, I don't think we've reached a "have to" moment. There is no clear imperative. The automatic budget cuts supposedly dangling like a Sword of Damocles over the heads of reluctant politicos is simply not credible. President Obama says he won't back off it, but he doesn't exactly have a solid record of sticking to his guns.

Eventually, politicians will right the fiscal ship of state. On that point I'm an optimist. But they will do it when they must, not next week.

At least that's what I'm betting.

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