The 12-member super committee created to slash the federal deficit is powered by the threat that if it doesn’t come up with $1.2 trillion in savings, automatic, across-the-board cuts will be instituted to reach that same goal, with half of those cuts hitting the Pentagon.
Don’t believe it.
The supposed across-the-board cuts aren’t slated to go into effect until January 1, 2013. Put more simply: They might not ever go into effect.
The automatic cuts — known as sequestration — are often discussed in Washington as if they’re certain, an inevitability that Congress won’t be able to prevent. But on the same day those cuts would go into effect, the Bush tax rates, which President Obama extended for two years, are set to expire, leading to an “automatic” tax hike that is treated in Washington as anything but inevitable. (That the two coming policy changes are approached so differently — cuts are expected; expiring tax breaks for the wealthy are brushed aside — is a window into Washington’s priorities.)
A host of other tax cuts and credits will expire on the same day, including the alternative minimum tax, ethanol tax credits, renewable energy credits and others important to businesses, the wealthy and the middle class.
A lame duck Congress would have two months after the 2012 election to stave off the expiration of both that tax policy and the super committee’s “automatic” cuts.
The most likely scenario: The super committee locks up along partisan lines and, after the 2012 election, bipartisan negotiators deal with the tax cuts and the super committee’s sequestration cuts, along with a basket of other expiring provisions, in one set of negotiations. Democrats will be pressured by the coming sequestration, while Republicans will be motivated by the expiration of the Bush tax cuts. And all of their negotiations will take place in a political and economic climate impossible to predict today.
“All of this at some point comes together,” said Budget Committee Chairman Kent Conrad (D-N.D.) of the Bush tax cuts and the sequestration. “One thing about this place, the paces just keep repeating themselves.”
While many have portrayed the super committee as having some sort of automatic axe, other observers haven’t bought the idea. Stan Collender, a Democratic budget expert and consultant to Wall Street and Washington lobbyists, saw through it quickly, writing a report for Qorvis Communications downplaying the likelihood of the automatic cuts.
“There is a high probability that the super committee won’t be able to agree on a deficit reduction deal and that the across-the-board spending cuts that are supposed to be triggered if that happens will NOT go into effect as scheduled in 2013,” he wrote. “Federal budget agreements have seldom, if ever, gone the distance. Instead, they have always been changed, waived, ignored or abandoned.”
- Pentagon Warns That Inaction in Deficit Panel Talks Could Devastate the Military, Economy (foxnews.com)
- Influential Group Looking For Super Committee To Fail (huffingtonpost.com)
- Deficit-cutting Democrats depend on Pentagon contractors, data shows (salon.com)
- Congressional Deficit-Cutting Group Faces an Uphill Fight – NYTimes.com (mbcalyn.wordpress.com)
- Can the Super Committee Raise Taxes or Not? (blogs.wsj.com)