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Wednesday, November 29, 2023

Can the deficit-cutting panel actually work?

Tourists walk past the Capitol dome in Washington. (REUTERS/Jonathan Ernst)

Having said no to taxes for months, Republicans now are saying maybe, in the face of public disgust over a deadlock in the Congress, a near government default and a worsening global economic crisis.

Prompting some hope for a return to fiscal order are the statements and reputations of some of the six Republicans named this week to join with six Democrats on a special committee to end the standoff over the U.S. deficit.

In one of his first interviews after being named to the “Joint Select Committee on Deficit Reduction,” Representative Dave Camp told Reuters, “I don’t want to rule anything in or out” when the panel starts its work.

That’s a far cry from what had been a Republican wall of opposition to any tax increases when President Barack Obama negotiated a $917 billion deficit-reduction down payment with Republicans that also was aimed at raising U.S. borrowing authority by August 2.

Public disgust with the long, bitter budget and debt limit fight that has consumed Washington all year could have played a role in the less confrontational tone.

A Reuters/Ipsos poll released this week found 49 percent of those polled had a negative view of Republicans in the wake of the debt limit deal, compared to 42 percent for Obama and 40 percent for Democrats broadly.

John Feehery of Quinn Gillespie Communications and a former Republican congressional staffer said lawmakers may now be more willing to reach a deal on additional deficit reductions given the public reaction to the debate over the debt ceiling.

“People are going back home (during the August recess) and they are finding the intense partisanship does not really work in the rest of the country,” Feehery said.

Further evidence that the “super committee” is taking its responsibilities seriously: members are considering cutting short their August recess to start work, knowing a November 23 deadline allows little time to tackle major tax and budget questions that could lead to another $1.5 trillion in savings over the next decade.

Representative Chris Van Hollen, a Democratic member of the panel, told Reuters, “There’s a good argument in favor of getting an early start.” “There have been a number of conversations on both sides of the aisle” about it, he added.


Feehery and other analysts feel the composition of the committee also bodes well for agreement.

“These are folks who are deal cutters,” Feehery said of Camp, Republican Senator Rob Portman, a former White House budget director, and Representative Fred Upton. Upton worked on some major tax and spending agreements during a stint at the White House budget office under President Ronald Reagan.

Even conservative partisan Representative Jeb Hensarling may be ready to deal, analysts say. “In the right context I do not see him as a guy that would just stick himself in concrete,” said Steve Bell, a former Senate Budget Committee aide who is now with the Bipartisan Policy Center.

These Republicans will be sitting across the table from some experienced Democratic deal-makers, notably Senators John Kerry, a former presidential candidate, and Max Baucus, who has deep experience in taxes and healthcare benefits, which will dominate the talks. Meanwhile, House Democrat Xavier Becerra, a liberal stalwart, has urged members to keep an open mind.

Becerra and fellow House Democrat James Clyburn could be instrumental in building support in the liberal wing of their party for any potential deal.

The group’s work will be getting underway against the backdrop of global market turmoil, a European debt crisis and rising concerns the U.S. economy could reverse its recovery from the deepest recession since the Great Depression.

And later this month, the Congressional Budget Office is expected to release its latest economic outlook and quantify its impact on Washington’s deep budget deficits, which have been hovering around $1.5 trillion annually.

All these factors put pressure on the panel to produce.

Also working in the committee’s favor is that $1.5 trillion in savings over 10 years is not insurmountable in the context of a $3.7 trillion annual budget.

Negotiations earlier this year led by Vice President Joe Biden have identified many possible ways to pare deficits.

So, if Republicans were to go along with modest revenue increases, Democrats might find it easier to say yes to equally modest savings to the Medicare healthcare program for the elderly, some of which already have been suggested by Obama.

But even if the super committee settles on around $1.5 trillion in new savings, it likely will not be enough to satisfy global financial markets demanding a more ambitious result — as much as double that amount — accomplished through long-term reforms of government benefit programs and a broad revamp of the U.S. tax code.

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1 thought on “Can the deficit-cutting panel actually work?”

  1. Clearly, if nothing else, what these last few weeks have shown us is that our proud nation…. something our founding fathers set up as a “Federal Constitutional Republic” with its various built in checks and balances designed primarily to prevent absolute tyranny from a fanatical King…. simply doesn’t work when it comes to tackling major structural and fiscal change in the modern era.

    Unfortunately, in many ways our constitutional system of government has now become something of a straightjacket where a highly vocal political minority…. any minority…. can very effectively block the efforts of the elected majority and thereby bring the nation to the point where absolutely NOTHING gets done.

    Right now, our country is a mess with a crumbling infrastructure, systemic and cultural decay, and huge deficits that only politicians making extremely unpopular choices can effectively address. Yet, so far, all we’ve gotten out of Washington is yet more hot air. Perhaps that’s largely because, under our Constitutional Republic form of government, the elected majority cannot effectively rule because the “checks and balances” in our Constitutional system very effectively prevent it.

    I find it interesting that our friends to the north in Canada faced a ballooning debt situation very similar to ours back in the 1970s and 1980s. At that time, their government’s debt was soaring under the socialist “tax and spend” policies of the Trudeau and Maloney eras.

    But it took a clear Liberal majority government in the 1990s under the able leadership of Jacques Chretien and Paul Martin to ram through a massive program of sweeping fiscal reforms (which included steep tax increases as well as significant cuts in government spending) all done in an attempt to once again bring the country’s books back into balance.

    Needless to say, at the time, those reforms were DEEPLY unpopular with the majority of Canadians. Yet, because Chretien had a clear majority under Canada’s Parliamentary form of government (a system based largely on British Parliamentary rule) he was able to ram through these long-needed reforms and ultimately get the job done.

    In short, because there are no systemic “checks and balances” designed to dilute and temper the majority’s rule in the Canadian system, Chretien was able to overcome the strong objections of numerous minorities for the overall long-term good of the country.

    The result today is that Canada now has one of the LOWEST debt to income ratios on the planet:

    Their banking system remains one of the strongest on the planet as well. Indeed, two of the 10 strongest private banks in the world are Canadian. And, while Canada DID suffer economic turmoil in the latest economic downturn, what they went through was NOTHING compared to the economic misery the USA has since been going through. And to top it all off, unlike the USA, Standard and Poors has once again rated Canada’s ever-dwindling government debt as AAA.

    Andrew Potter, writing in Canada’s Macleans Magazine very effectively discussed these issues in a recent editorial called “The Trouble With Too Much Democracy”.

    It’s well worth the read:

    Indeed, rather than too many do-nothing politicians, perhaps what we in the USA are REALLY suffering from is “too much democracy”.

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