Respected Opinion...
The relative importance of debt
By Jim Surber  
December 9, 2011 

I can only guess that the recent failure of the Congressional “super-committee” came and went without much fanfare because most Americans either assumed it would fail, or didn’t consider the task to be all that important. As expected, the members of each political persuasion blamed their failure on those members of the other party. It would be easy to dismiss this sideshow as another deplorable example of our current gridlock, until you look at the relativity of their task compared to what must, or at least what many of us think must, be done. 

The bi-partisan group of 12 senators and congressmen certainly were not given an impossible target to hit. They were required to determine a list of actions to reduce the nation’s deficit by $1.2 trillion over the coming ten years. While that certainly sounds like one helluva lot of dollars, it is less than 3% of the government spending expected during the same ten-year period, which is $44 trillion. The target was also less than one fourth of the approximate $5 trillion that would be required if the books were to be balanced in Washington. 

The committee was also given exceptional powers in the realm of politics. Its result, had there been one, would have been subject to a simple up-or-down vote with no amendments; and the Senate could not use the power of the filibuster. In spite of this advantage, the result was that nothing came out to be voted upon, and after three months of deliberations the blue ribbon team admitted failure on the 21st day of November. 

Any private businessman, manager, or local government official, if given the same task with the same gravity and at the same percentages, would consider it a walk in the park. But this apparently is not the case in Washington. 

So what does this failure mean? Now the Congress is supposedly scheduled to be subject to automatic budget cuts of the same $1.2 trillion that will kick-in in 2013. This will include $600 billion from defense spending and the remaining half from things such as education, housing and environmental protection. This is little more than a bizarre mechanism, which is to be mandatory after the supposedly unexpected failure of the first mechanism, to deal with a total lack of discipline and fiscal responsibility among our elected leaders. 

What has this exercise in futility shown? First, that Congressional Republicans and Democrats cannot make any type of fiscal deal, even when given the best possible conditions to make it. Democrats apparently refused to consider any structural reforms to the big social programs of Medicare, Medicaid and SS. Republicans apparently vetoed any rise in taxes, in spite of the fact that no credible analyst believes that the current federal deficit can be reduced to a sustainable level by spending cuts alone. 

Second, the committee’s collapse leaves in the wings another nasty fiscal shock that will take place in less than three weeks. At the end of 2011, the temporary cut in the payroll tax will expire along with the extended unemployment benefits which now stand between millions of Americans and poverty. Many expected that an extension of these would be part of the result of the super-committee, but now we know that this will not happen. 

Finally, it looks as if a budget fight must now take place toward the end of next year, before and after the presidential election. Congress will be trying desperately to reverse the now automatic budget cuts that it agreed to, originally to make it impossible for the super-committee to fail. The President has said that he will veto any such attempt. Ironically, the Bush-era tax cuts are also set to expire, which will give a sharp rise for income tax payers of all brackets. This may be the only way that taxes on the highest American earners will be raised. 

But maybe politicians are counting on an upcoming shot to the US economy by the 2012 election, in which money is expected to play a larger part than ever before. Thanks to the US Supreme Court decision that nullified many of our country’s sparse restrictions on political donations, the biggest spenders will not be the candidates or the parties. They will be “superpacs” that can raise unlimited cash from anonymous donors and spend it to praise or trash any particular candidate. Despite the best efforts by unions, Democrats will be outspent and forced to paint opponents as tools of shadowy corporate interests.        

Are many of us foolish for believing that closing the gap on our nation’s spending is a crucial action that is already long overdue? Could it be that the failure of the super-committee was because it felt no real sense of urgency, or does the power of political ideology trump all logic and reason? Given the current economic situations in Europe, will it take a genuine, terrifying, American bond crisis before the politicians are forced to act? 

Just eleven years ago, less than 40% of US debt was held by the American public. Today, it is 70% and projections show that in less than eight years it will be nearly 100%. It is hard to understand how this will happen. Then again, there are many who would say, “After all, it’s only money.”