Just one week into its mandate to lop $1.5 trillion off federal spending over the next 10 years, Congress’s Joint Deficit Reduction Committee is already facing calls to do dramatically more.
This mission creep began with President Obama’s request last week for the panel to find offsets for his $450 billion jobs initiative – setting a new bar at nearly $2 trillion in net savings.
Then on Monday, budget watchdog groups, including the chairmen of Mr. Obama’s 2010 Bowles-Simpson deficit commission, called for the panel to “think big” and come up with at least $4 trillion in deficit reduction.
“The public cares rightfully about two huge issues: debt and jobs,” says Maya MacGuineas, president of the Committee for a Responsible Federal Budget, who joined Erskine Bowles and former Sen. Alan Simpson (R) of Wyoming in the call for a plan of broader scope.
But big cuts are not necessarily incompatible with job creation, she adds, so long as the overall package is large enough to include targeted spending on jobs. “The plan has to be smart, spread over a decade, with other pieces for growth that will actually create jobs,” she says.
The deficit reduction “super committee,” as it has come to be known, was proposed as a sweetener during a bitter debate last July over raising the national debt limit to $17 trillion – a move that many tea partyers and GOP conservatives had pledged to oppose. It’s now the defacto clearinghouse for major spending legislation for the 2012 fiscal year.
The panel has until Nov. 23 to present a roadmap to getting the nation back on a fiscally sustainable course over the next 10 years. Congress must vote the package up or down on an expedited track – no amendments, no filibuster – by Dec. 23. Failure to do so would trigger deep cuts in discretionary spending, half to be sustained by the Pentagon, after January 2013.
But the 12-member panel begins its work deeply divided on basic assumptions on what caused the nation’s unsustainable deficits and how to curb them. Republicans see the issue mainly or solely as too much government spending. Democrats tend to see the problem as not enough government revenue, plus Bush-era policies – including historic tax cuts and two wars – paid for on credit.
Opening the panel’s first public hearing on Tuesday, Sen. Patty Murray (D) of Washington, a co-chair, called for “a balanced and bipartisan plan to fiscal health and economic growth.” She applauded a budget deal in the 1990s between President Clinton and Republicans that made “smart cuts” to government spending, but also continued the “strong investments in health care, education and infrastructure” needed for economic growth.
Republicans on the panel are cool to the prospect of adding billions in stimulus spending to their mandate. “A path to credible deficit reduction is a jobs program,” responded Rep. Jeb Hensarling (R) of Texas, the Joint Committee’s other co-chair. “We have a spending-driven debt crisis. The deficit reduction will be a jobs plan.”
But Congressional Budget Office director Douglas Elmendorf, the only witness at Tuesday’s opening hearing, told the panel that there is “no inherent contradiction” between spending to boost jobs today and fiscal restraint in the future. One approach, he said, would be tax cuts or spending hikes in the near term to spur employment, spending cuts or tax hikes in the longer term to cut deficits.
“If policymakers wanted to achieve both a short-term economic boost and longer-term fiscal sustainability, the combination of policies that would be most effective, according to our analysis, would be changes in taxes and spending that would widen the deficit today but narrow it later in the decade,” he told the panel.
“Such an approach would work best if the future policy changes were sufficiently specific, enacted into law and widely supported so that observers believe that the future restraint would truly take effect,” he added.
Ehrendorf also warned the panel that if Congress does not allow certain popular programs to expire, the national debt is projected to reach about 190 percent of gross domestic product by 2035. These programs include the Bush tax cuts, the annual fix for the Alternative Minimum Tax, and the fix for Medicare’s mandated cuts to payment rates for physicians.
“In sum, the federal budget is quickly heading into territory that is unfamiliar to the United States and to most other developed countries as well,” he added.
In what is potentially an even more dramatic case of mission creep, he told the panel that if it wants to reach the level of debt reduction it was mandated to achieve, and if Congress extends those popular policies, then the panel would actually need to find more than $6.2 trillion in savings over the next 10 years.
Getting to debt reduction at any level will be difficult. Any plan requires at least seven votes on the 12-member panel, which is comprised of six Democrats and six Republicans, all with strong ties to their respective party leadership. In a highly polarized climate, getting even one swing vote could be a tall leap, especially in the run-up to a presidential election year.
“It’s a super committee, not a superhero,” says Stan Collender, a longtime federal budget analyst and now a partner at Qorvis Communications in Washington. “To ask them to pay for a jobs bill or get to $3 trillion or $4 trillion [in deficit reduction] is like asking Superman to save the world while he’s surrounded by Kryptonite.”
“They couldn’t agree on 50 cents right now. The only chance they have to succeed is to stick to the $1.2 trillion to $1.5 trillion original mandate,” he adds.