Supercommittee Deadlocked on Deficit Reduction

by John M. Curtis
(310) 204-8700

Copyright October 9, 2011
All Rights Reserved.                                         

           When President Barack Obama and House Speaker John Boehnrer (R-Ohio) couldn’t reach a deal on deficit reduction August 11, they created a 12-member bipartisan supercommittee to recommend $1.2 trillion in cuts to the federal budget.  Despite record low tax rates, Republicans refused to raise taxes, even among the nation’s wealthiest taxpayers.  Partisan gridlock during an election year, based largely on ideology, prevents both sides from responsible compromise.  Republicans’ refusal to consider new taxes is based on a no tax pledge, refusing to compromise no matter how large the deficits.  Most economists agree that deficit reduction is a good thing, resulting in a stronger U.S. credit rating, downgraded by S & P Aug. 5.  What Washington can’t agree on is how to get to responsible deficit reduction.  GOP’s Tea Party wing advocates slashing the size of the federal establishment.

            Elected officials know that massive reductions in government spending—now advocated by the GOP—would cause intolerable government layoffs, contributing mightily to the national unemployment rate.  Federal Reserve Board Chairman Ben S. Bernanke warned Congress against slashing government spending.  Of all the things that could push the U.S. into a double-dip is a significant reduction in government spending.  Republicans’ blind insistence on tax reduction is built off a failed theory by former President Reagan’s economic advisor Dr. Arthur Laffer, popularly known as “supply-side economics.”  Laffer promised Reagan in 1981—just after his inauguration—that 10% across the board tax cuts would eliminate former President Jimmy Carter’s $60 billion budget deficit, resulting in a balanced budget by 1983.  By 1983, the deficit was over $100 billion, on its way $260 billion when Reagan left office in 1989.

            Most economists agree that excessively tax rates punish consumers and drag down the economy.  Today’s tax rates are some of the lowest in U.S. history, no longer able to generate enough cash for the U.S. Treasury to subsidize the vast array of federal government programs.  Tea Party members of Congress want to turn back the clock to the days before Franklin D. Roosevelt’s New Deal, where government played an inadequte role in supporting social welfare programs.  Most economists believe that large government’s like the United States require a health stream of tax revenue to function successfully.  Like setting sails over the sea, the ship of state must balance appropriate tax levels with the size of the national economy.  Today’s problems in the Eurozone stem from the lack of a common tax base to generate enough revenue to fund priority government services.

            Disproportionately low tax rates, especially for the superrich, have robbed the U.S. treasury of the needed tax revenue to fund national priorities.  GOP members of the so-called supercommittee find slashing Medicare, Medical and Social Security a better fix that generating more tax revenue.  No one has a crystal ball of how long it will take for the economy to recover enough to generate enough tax revenue to balance the budget and pay down the national debt.  GOP’s current plan to slash government spending could send tens-of-thousands of government workers to the unemployment lines.  Driving up more unemployment practically guarantees a double-dip recession.  “Fairness has to be a prerequisite for it,” said House Minority Leader Nancy Pelosi (D-Calif.).  “We have just come through passing a bill that was (all pending) cuts, no revenue,” highlighting the Republican-Democrat gridlock.

            As the GOP grapples for its 2012 candidate, the supercommittee must get beyond partisan politics and look at reality:  Tax rates must be adjusted to reduce deficits and fix the economy.  Today’s excessively low tax rates harm the economy by forcing lawmakers to take counterproductive actions.  While everyone wants less waste, fraud and mismanagement, they don’t want to cast federal, state and local government work forces into employment.  “I made it clear to the Republican members of the supercommittee that I expect there will be an outcome, that there has to be an outcome,” said Boehner, playing his cards close to the vest.  Boehner won’t dare step out of line when it comes to calling for new taxes.  He knows that if the supercommittee can’t compromise, it will trigger the so-called “sequester” that calls for irreversible spending cuts to defense, Medicare, Medicaid and Social Security.

            Instead of the supercommittee assuring more gridlock, they should reach a consensus on generating more tax revenues.  Simply slashing priority government spending won’t fix ballooning budget deficits that threaten the U.S. economy.  Slashing the U.S. budget hurts seniors, disabled and ordinary citizens counting on government services and employment.   If the GOP gets its way, it practically guarantees higher unemployment and double-dip recession.  Some Republicans seek nothing short of sabotaging economic recovery in hopes of unseating Obama in November 2012.  All members of the supercommitte must put politics aside to do what’s right for the U.S. economy.  Harming the economy hurts U.S. national security by de-funding important national priorities.  GOP elected officials must suck it up and say no the their counterproductive “no tax pledge.”

About the Author

John M. Curtis writes politically neutral commentary analyzing spin in national and global news.  He's editor of OnlineColumnist.com.and author of Dodging the Bullet and Operation Charisma.

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