Congressional Super Committee: What is the problem?

The Congressional “Super Committee” continues its deliberations with less than 8 days before they are due to report their findings. There have been closed meetings, partisan bickering, perhaps some good faith negotiations, finger pointing and intractable positions. Let’s add hand wring and whining to the description also. Nothing is settled yet.

The purpose of the Committee is to try to agree on an allocation of $1.2 trillion in budget savings over the next ten years. Repeat that, please. Ten years. There is a good chance there will be no agreement at all which will lead to prearranged automatic cuts of the same amount starting in 2013.

To put it all in perspective, the Federal Government according to the Office of Management and Budget in its mid-year reviews has projected in the next ten years the Federal Government will spend $45 trillion. Repeat that, please and spell it out---Forty Five Trillion Dollars.

The math, please. Dividing $45 trillion into $ 1.2 trillion gets a result of .0266 or a cumulative budget reduction over the current baseline of a bit more than 2.6 percent over ten years.

This is a joke right? My goodness, you would think the process could be done over lunch, maybe at happy hour? What is the big deal here? Is it that difficult to cut the pie by such a small amount?  What are they doing? What is the problem?

I want to dwell on the 10-year part. No one really knows what will happen in the next 10 years. Another war or two? Maybe the Cubs will win the World Series. Perhaps, the illegal population in California will grow by 20 million and will leave the Union to form its own country. Maybe oil hits $200 a barrel or interest rates go to 15 percent. China invades Taiwan, what then? Maybe, I hit the lottery, take my money offshore and open a scuba shop?

I do not know how any person with an I.Q. above room temperature can believe the level of Federal spending and deficits stretching beyond the pale are sustainable and will not lead to dramatic and horrible consequences. The country is already feeling it now. The Federal deficit is massive, grows around $4 billion a DAY. Most countries not even have a GNP of $4 billion a year.  It is hard to even comprehend. It simply has to be addressed and it has to be now.

The Super Committee has unfortunately turned into more or less a ruse. Whatever the outcome, there is no binding effect. The cuts are too small and too far away to make any difference. Any Congress can change the results. It looks like it is more kick the can down the road and the road ends soon.

Outlays for the Federal Government this fiscal year will be in the neighborhood of $3.6 trillion. In ten years, the projected outlays are $5.6 trillion, and this assumes all the Bush tax cuts for everyone vanish. My goodness. In addition, deficits are projected in every year, big deficits, huge deficits.  Does it really matter what the savings are in this or that program in 2021? Not sure the economy will make it that far in decent shape.

 Adding to a bad situation is the tendency of the Congress to try to play short-term budget games counting this saving or that illusory saving and ignoring the political reality and budget impact of extending this tax cut and that tax cut.

Even if the Super Committee agrees on something, there are a number of other budget issues that must be dealt with before the end of the year. Hello, expiring unemployment compensation, expiring employment tax cuts, other expiring tax provisions having hundred of billions of dollars in budgetary effect. Bush tax cuts anyone? Even if not extended for upper income taxpayers, the extension for the 98% of the rest of us is an enormous budget buster.

 It is hard to see how this all gets positively resolved. If the Super Committee- that is only 12 people- cannot agree on such a picayune reduction, I am not sure there is much to put your faith in.  

 

Comments

[Beekeeper]

I think you are right, a bunch of cowards in washington and where is that so-called president on all of this?

[frank barnako]

You're absolutely right. The $trillion 'cut" is a pea under the mattress that no one will feel. You know what they're going to do. Nothin'. It will be like a communique after Obama and the Chinese meet - 'full and frank discussion' and no action or, wait a minute, we'll take care of it next year, after we get recommendations from ... wait for it ... a committee we'll appoint to study the fine points. Throw'em all out - even Frank Wolf. All of 'em.

Hmm, sonder if I can get the"Throwthemallout.com" domain.

Nope. Somebody already has it. :(