WASHINGTON—The U.S. supercommittee has failed to meet its deadline for securing an agreement on reducing the U.S. deficit.
“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,” Rep. Jeb Hensarling (R-Texas) and Sen. Patty Murray (D-Washington), said a statement Monday afternoon.
Although the deadline for the deficit deal is technically midnight Nov. 23, under the 2011 Budget Control Act, which created the committee, the proposal must be made public 48 hours ahead of the final vote.
The supercommittee’s failure to agree on strategies to cut U.S. debt will be “a huge opportunity missed,” says Alice Rivlin, a former director of the White House Office of Management and Budget.
The 12-member committee, officially titled the Joint Select Committee on the Deficit Reduction, was established in August, with the mission to shave a minimum of $1.2 trillion dollars off spending over the next decade. In the event of the committee’s failure, automatic cuts were to take place—largely in defense and health.
President Barack Obama said he will “veto any effort to get rid of those automatic spending cuts to domestic and defense spending. There will be no easy off ramps on this one,” during a Nov. 21 speech at the James S. Brady Press Briefing Room at the White House.
Rivlin, a former vice chair of the Federal Reserve Board, says $1.2 trillion was never going to be enough to get the U.S. economy on a sustainable track, and what was ultimately needed was $4 trillion to $5 trillion.
“The $1.2 trillion does not stabilize the debt; the debt would still be growing faster than the economy can grow and that is a definition of a bad problem,” she told a forum at the Brookings Institute on Monday.
Going Big
The supercommittee had the federal power to achieve a Go Big strategy in terms of major reforms, one that could have reined in the deficit to a sustainable level, Rivlin said.
This would have required both, curbing the growth of entitlement programs like Medicare and Social Security and reforming the tax code to raise more revenue.
“Those two things have to be part of the solution.”
Rivlin said she had testified before the supercommittee and recommended the Go Big strategy.
“A lot of us thought that that big scenario was easier than the small one and it certainly got a lot of attention,” she explained.
Indeed, the idea did gain support with over 100 representatives signing a letter recommending a Go Big strategy. The letter was presented to the committee by Rep. Heath Shuler (D-N.C.) and Rep. Mike Simpson (R-Idaho).
“There’s no more time for partisan finger pointing—and frankly, the American people no longer have the stomach for it” said Simpson in a statement Nov. 16. “No political party has a monopoly on failed policies. What Americans really want is for Republicans and Democrats to set aside their party labels and focus on what is best for the country.”
Finger pointing, however, what was transpired, with both parties blaming the other for the ensuing failure.
“When our Democratic friends are unable to cut even a dollar in spending without saying it has to be accompanied by tax increases, I think that tells you all you need to know about our runaway spending,”Sen. Jon Kyl (R-Ariz.) said on NBC’s “Meet The Press” last weekend.
Sen. John Kerry, (D-Maine) accused the Republicans of holding out.
“I say to my Republican colleagues … we are ready to do $1.2 trillion. ... If they will give up their insistence of the Bush tax cuts, we can get this done,” he said on NBC.
With Republicans refusing to budge on tax increases and the Democrats unwilling to concede on cuts to Medicare and Social Security, Rivlin says both parties are to blame.
“Those are very difficult positions as actually we have to do both those things,” she said.
Consequences Serious
While the market may not have a meltdown largely because the U.S. economy still looks a better bet than Europe, Rivlin described the consequences as “pretty serious.”
“The really big issue is that we missed a big opportunity to fix not only some long-run problems but some short run.”
Critical are extensions of both the payroll tax and the unemployment benefit, which are due to be addressed in December and would have been easy to “fold into a big deal.”
“Now those have to be done separately,” she said, adding that failure to effectively address the deficit will affect jobs growth and U.S.’s ability to fend off a recessionary trend.
The economic concerns will add further fuel to increasing tensions in the lead up to federal elections next year.
