“I have great respect for each of you individually, but collectively I’m worried you’re going to fail — fail the country,”former White House chief of staff Erskine Bowles, a co-chairman of President Obama’s fiscal commission, sternly told the congressional supercommittee last week. Elite pressure is building on the committee to reach for a “grand bargain” to cut trillions out of the budget deficits over the next 10 years. Last week 100 House members, including 40 Republicans, dispatched a letter urging “a big, grand bargain" with “all options”–code for tax hikes–“on the table.”
In fact, the best service the supercommittee could do for the country is to fail. It is charged with a task that can only weaken an already faltering economy. The committee is like a gang of delinquents armed with grenades set to go off, but struggling to build a really big bomb that could do even greater damage. We’d prefer the grenades get defused, but we truly don’t want them to put together the bomb.
Misbegotten Mission
The supercommittee, the misbegotten offspring of the summer’s debt ceiling deal, is charged with reducing the deficit by a minimum of id="mce_marker".2 trillion over 10 years by cutting spending or raising taxes. It must report before Thanksgiving and any report must be voted on before Christmas, with no amendments, no filibuster, no extended debate, majority rule. If it fails, then id="mce_marker".2 trillion in automatic cuts in discretionary spending, split between domestic and Pentagon budgets, kick in. It provides a choice, as Newt Gringrich put it, between shooting yourself in the head and cutting off your right leg.
This choice is posed as the country is plagued with a faltering recovery, and severe mass unemployment—25 million people in need of full-time work. Having reduced interest rates to near zero, Federal Reserve Chair Ben Bernanke is pleading for actionfrom the Congress to boost the economy. “It would be helpful if we could get assistance from some other parts of the government to work with us to help create more jobs,” he said. That would require spending money or cutting taxes—exactly the reverse of the supercommittee’s mission.
As Rep Jan Schakowksy put it, the supercommittee is mired in “yesterday’s conversation, frankly, the whole issue of the obsession with cuts and debt reduction,” when instead the Congress must be focused on jobs.
In fact, the economy already faces a severe hit from the folly of the deficit hawks. Republicans have obstructed every portion of the president’s modest job plan. Spending from the Recovery Act is ending. The first of the enforced spending cuts from the deficit deal are kicking in. Extended unemployment insurance is due to expire at the end of the year, as is the payroll tax cut. JP Morgan Chief U.S. Economist Michael Feroli estimates those measures will cut gross domestic product by about 1.7 percentin 2012, virtually driving the U.S. into recession. With companies sitting on $2 trillion in profits looking for customers, there is no indication the private sector will replace the jobs or demand.
