The headlines say that the Joint Select Committee on Deficit Reduction, better known as the “Super Committee”, is headed for failure. The Super Committee is a 12 member committee (6 Republicans and 6 Democrats) that was created by the Budget Control Act of 2011, and is charged with identifying $1.2 to $1.5 trillion in deficit reductions over the next ten years…and they have until midnight on Wednesday to do it.
The committee is faltering. The ideological divides are deep and the numbers are staggering. The problems the committee is trying to resolve are much more complicated than the issues on the table. And as much as failure sounds bad, it might not be the worst thing.
If the committee doesn’t manage to come up with an agreement, by law, automatic budget-cuts (called sequestration) will be implemented. The cuts would be across the board, and mandated, and would eliminate $1.2 trillion in spending…but would not include revenue increases.
Some programs would be spared, like social security, veteran’s benefits, Medicaid and food stamps. But one concern is that military spending would take a big hit.
But none of this would happen immediately. The cuts would not take effect until January 2013 (and even at that, the debt will grow faster than the economy).
And meanwhile the national debt edged above a record $15 trillion last Wednesday (to be exact, total public debt outstanding is $15.03 trillion). The debt ceiling was raised to $15.2 trillion in August… and over the past 6 months we have added $700 billion to the debt.
But unlike the budget debate in August, if the committee is unable to come to terms it won’t amount to a default… it will mean a long overdue fiscal reality check. Excessive spending is the heart of our problem…from 1971 to 2010 discretionary spending grew an average 6.4% annually. And According to the Wall Street Journal, if the automatic spending cuts are triggered, it will mean a $70 billion budget cut in 2013 (one of the largest on record).
Even if it is an automatic mechanism, this would at least show some discipline. A ‘Super Failure’ would be something of a solution in itself.