Tax Analysts Blog

Super Committee Gridlock: In Celebration of Failure

Posted on Nov 22, 2011

We're being told America's future has suddenly grown more bleak because the Joint Select Committee on Deficit Reduction has dropped the ball. I'm not sold on that conclusion. The failure of the Super Committee might be exactly what America needs: a long overdue kick in the back side.

The group's partisan gridlock -- which was entirely predictable -- will trigger spending cuts of $1.2 trillion over 10 years, beginning in 2013. But let's step back and recognize these automatic cuts for what they are: A modest dose of bitter medicine, but far less than what's necessary to cure the patient.

Oh, but there will be pain when the Pentagon budget gets cut! There will also be pain when discretionary spending gets scaled back! Of course these things will hurt. Who ever said austerity -- or in our case 'austerity lite' -- would be painless? This is what fiscal belt-tightening looks like; get used to it. Anyone who thought we could significantly curtail public spending without adverse consequences was horribly naive. And if we're lucky some of these spending cuts might benefit the nation as a whole. (Here's hoping our absurd ethanol subsidies get nixed as a result of all this.)

Two big problems remain.

First, the government activities that most desperately require reform -- entitlement programs -- will be spared from the automatic spending cuts. Second, the cuts aren't big enough. In fact they're not even close. A sovereign debt crisis still looms because our long-term finances remain unsustainable even with the cuts.

Remember back to this summer before our credit downgrade? The rating agencies warned that the U.S. must trim the deficit by a minimum of $4 trillion over 10 year. The key word in that sentence is 'minimum.' The $1.2 trillion in savings from Super Committee inaction is a fraction of what's required. We aimed too low.

So how does Congress find $4 trillion in deficit reduction? It just so happens that's roughly the amount of tax revenue that falls into our lap when the Bush tax cuts expire at the end of next year. So forget the noise surrounding the Super Committee. The big money is all about what happens on December 31, 2012.

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