Posted on Mon, Nov. 21, 2011
last updated: March 15, 2013 11:57:47 AM
WASHINGTON — The failure Monday of Congress' supercommittee — the bipartisan panel that was supposed to cut at least $1.2 trillion from looming federal deficits — will trigger a fresh series of partisan clashes over taxes, spending, Social Security and a host of other fiscal matters, clashes likely to be begin immediately.
The collapse of the 12-member panel, announced Monday in a joint statement by co-chairs Sen. Patty Murray, D-Wash., and Rep. Jeb Hensarling, R-Texas, sent U.S. stock prices plunging and created at least another year's worth of fiscal uncertainty in Washington, smack in the middle of an already contentious 2012 election campaign.
"After months of hard work and intense deliberations, we have come to the conclusion today that it will not be possible to make any bipartisan agreement available to the public before the committee's deadline," the co-chairs said.
About the only thing the panel agreed on was the final statement of surrender, a four-paragraph press release that vowed to keep fighting for fiscal discipline.
When Congress returns Monday from a Thanksgiving recess, it will quickly confront at least four thorny issues that need to be resolved in the next few weeks.
Lawmakers must consider extending this year's Social Security 2 percent payroll tax cut; approving extended unemployment benefits; adjusting the Alternative Minimum Tax so it doesn't hurt the middle class; and changing how physicians are paid for Medicare patient care.
Each is likely to detonate new partisan skirmishes. Each also could increase the deficit, which reached $1.3 trillion the last fiscal year. The national debt climbed over $15 trillion last week.
Next year will bring new challenges. The Bush-era tax cuts expire at the end of 2012, and because of the supercommittee's failure, $1.2 trillion in automatic spending cuts are to be triggered starting in January 2013. Half will come from defense, half from domestic spending, but lower-income programs and Social Security will be exempt. Medicare cuts would affect providers but not beneficiaries.
Partisan confrontations are likely on each of these issues in an election year when voters are disgusted with Washington, and financial markets are increasingly rattled by Washington's inertia. Stocks tumbled Monday in anticipation of the supercommittee announcement as the Dow Jones Industrial Average plunged 248.85 points.
An hour after the supercommittee officially gave up, Standard & Poor's said the U. S. government's credit ratings "are not affected by the announcement." It remains AA+, downgraded Aug. 5 from the previous AAA.
But the agency warned that if budget limits enacted this summer are eased, pressure to downgrade "could build."
President Barack Obama appeared after the panel's collapse in the White House briefing room and put the blame squarely on Republicans. Too many Republicans in Congress "have refused to listen to the voices of reason and compromise that are coming from outside of Washington," he said.
And don't try to undo the automatic cuts, he warned Congress, unless there's an equally bold alternative.
"Already some in Congerss are trying to undo these automatic spending cuts. My message to them is simple: No," Obama said. "I will veto any effort to get rid of those automatic spending cuts ... there will be no easy off-ramps on this one.
"We need to keep the pressure up to compromise, not turn off the pressure," he said.
The mood on Capitol Hill was glum, and analysts said the down mood was well-founded.
"All in all, this is just a stunning combination of cynicism and irresponsibility," said Burdett Loomis, a professor of political science at the University of Kansas. "This deadlock and the general lack of progress made bodes very poorly for upcoming basic decisions in a political year."
The committee, created as part of the August agreement to raise the government's debt limit, could not agree because the two parties would barely budge off long-held positions. Democrats insisted that any deal must include big revenue-raisers, including higher taxes on the wealthy. Republicans insisted on targeting spending on entitlements such as Medicare.
It became clear last week that neither side would give in. Even as the deadline approached, no meetings were held, as each side weighed the politics of stubbornness.
Democrats were well aware that if the committee failed, they still could achieve many of their policy goals. The Bush-era tax cuts will expire after 2012 if nothing is done, meaning the current top tax rates of 33 percent and 35 percent would revert to 36 percent and 39.6 percent. In addition, automatic across-the-board spending cuts totaling as much as $1 trillion over nine years would begin in January 2013, but programs for the poor will be protected.
Republicans, on the other hand, think they gain politically because they blocked higher taxes, at least for now. And many of them hope to alter the automatic spending cuts before 2013 to protect defense.
"Both parties have great election arguments," said Larry Sabato, director of the University of Virginia Center for Politics. "Obama uses this as part of his campaign against the do-nothing Congress. Republicans say, 'We're the only thing that stands between you and big tax hikes.'"
Independent analysts think the politicians are engaged in a dangerous game.
"I fear what's going to happen is we're going to descend into election-year politics. They're honing the blame game," said Robert Bixby, executive director of the Concord Coalition, a nonpartisan budget watchdog group.
Bixby predicted that lawmakers likely will try to remove or change the automatic 2013 triggers before they kick in — further alienating the public and alarming financial markets.
"Their credibility is pretty darn low, but it will go even lower if they try to fix the triggers," Bixby said.
The next fiscal flashpoint could come as soon as next week. Many lawmakers are uneasy about continuing this year's 2 percentage point cut in the Social Security tax, fearing it will starve the system's trust fund and increase the federal deficit. The tax paid by employees would return to 6.2 percent next year if nothing is done.
Other provisions also require quick action. Medicare payments to doctors would drop as much as 29.5 percent next year unless Congress acts. The Alternative Minimum Tax could have an impact on middle-income taxpayers unless adjusted.
Provisions allowing unemployed people to get up to 73 weeks of extended benefits would expire, and an estimated 2.1 million people could lose benefits through mid-February. Regular benefits are available for up to 26 weeks, but in states with higher jobless rates, those without work can get more.
"Something's got to be done about that stuff," said Alice Rivlin, a former budget director and Federal Reserve vice chair, "and it's expensive."
The supercommittee chairs' statement said they still hope Congress can find a way.
"Despite our inability to bridge the committee's significant differences, we end this process united in our belief that the nation's fiscal crisis must be addressed and that we cannot leave it for the next generation to solve," the co-chairs said. "We remain hopeful that Congress can build on this committee's work and can find a way to tackle this issue in a way that works for the American people and our economy."
Obama on Monday did sign a small piece of a $447 billion jobs package into law. It will repeal a requirement, scheduled to take effect in 2013, that government withhold 3 percent of payments to almost all contractors. The bill also will award breaks for companies that hire military veterans.
The rest of Obama's 3-month-old jobs proposals have languished, and few if any have much chance of passage. Still, the president said Monday: "My message to every member of Congress is keep going. Keep working. Keep finding more ways to put partisanship aside and put more Americans back to work."
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