WASHINGTON -- An ill-conceived scheme to make an end run around public opposition to major spending cuts to entitlement and social programs has foundered, with leaders of both parties huddling through the weekend to come to terms on a joint explanation for the spectacular failure of the super committee.
The White House and congressional leaders had thought that by empowering the Joint Select Committee on Deficit Reduction with broad powers to sidestep the traditional congressional quagmire, the panel would somehow be able to craft a "grand bargain" that trimmed Social Security, Medicare and Medicaid while perhaps raising taxes on the wealthy and cutting the defense budget.
Failure, the reasoning went, would mean living with $1.2 trillion in automatic cuts to defense and domestic spending starting in 2013. Leaders said often that such cuts were not an option, and as late as Sunday still held out faint hope of a last-second compromise. "I don't think there's failure yet. I believe that the elements of a deal -- probably not as big as some of us would like -- are still there," committee member Rep. Xavier Becerra (D-Calif.) said on "Fox News Sunday."
Yet sources familiar with negotiations have been saying for more than a week that the sides were deadlocked, primarily over how to treat the Bush-era tax cuts for the wealthy. Democrats want them to expire before they'll accept deep cuts to entitlement programs. Republicans have been insistent on lowering tax rates further. The elderly, then, have Republican recalcitrance to credit for the continuation of their benefits.
Instead of the 12 members of the super committee writing landmark legislation in backdoor meetings that is quickly rammed through Congress, public policy priorities will be determined by the American people in the upcoming election. And the conversation has moved dramatically away from deficit hawking and austerity measures. Immediately after the creation of the super committee, the markets tanked amid harrowing jobs reports. With the Occupy Wall Street protests elevating economic inequality in the political conversation, and Europe teetering on the brink of crisis, calls to slash social spending have less resonance.
Throughout the super committee ordeal, there were -- and remain -- very strong practical and political reasons for neither side to compromise with the other.
First and foremost, unlike with past threats of government shutdowns and the debt ceiling crisis last summer, there appear to be no immediate economic consequences for failure. Political elites assume the world waits to turn on news from Washington. "Total, embarrassing failure. The markets and the country will hate it," Mike Allen wrote in Sunday's Politico Playbook. But shame aside, the markets have set low expectations for the committee from the beginning and have hardly been reacting at all to its lack of progress. Wall Street is much more concerned about the potential implosion of the European and ultimately the global financial system.
"I don't think there'll be much of a reaction," said economist Mark Zandi on Fox. "Investor expectations, with regard to the committee, have been and are still very, very low. I don't think many expected much to come out of the process. So, you know, at the end of the day, I don't think there'll be a significant market reaction."
Not coincidentally, there are no immediate practical or policy implications for failure either. While it's true the law requires automatic cuts to be triggered in the event that the super committee fails to reach a deal, that ax isn't scheduled to fall until 2013, after the presidential election. The Bush tax cuts expire on the same day and could become part of a compromise to stave off the sequestration, as HuffPost predicted back in September. Members of both parties have already said they'll fight to save the Pentagon from cuts.
Without immediate backlash, the politics became much more important. A large group of legislators pushed the super committee to "go big" -- which could have at least given each side some cover and victories to point to -- but the downsides of cutting a real compromise apparently trumped the desire to strike a deal.
The failure has left the centrist class ashamed, but still hopeful that if serious, reasonable people come together, a grand bargain is possible. Allen's Playbook is as good a guide to that view as any. "Playbook was a superoptimist," he wrote Sunday. "We thought that human factors would prod ambitious members to crack the code, and that the committee would take on its own ecology, regardless of pressures from above or below. But we were punk'd: The supercommittee -- one of the most fascinating government experiments of this generation -- never existed as a dynamic political organism."
But the idea behind it is still salient, he wrote. "The concept of the supercommittee, as POLITICO's Jake Sherman articulated in an email: '[I]f you put 12 serious members in a room, no distractions, easy way through the Senate [direct path for bill], they'd be able to get something.' BUT THAT NEVER HAPPENED: The 12 members never had specific, hot-box, come-to-Jesus discussions. It was all white noise. Neither side was willing to jump first, and the two didn't have the capacity to jump together."
Members of the committee, meanwhile took umbrage at the criticism heaped on the panel for its closed-door meetings, noting that that's exactly what the chattering class had said it wanted. "It's interesting. Everybody says, 'If they'd just get into a room by themselves, they could figure this out,'" Murray said when challenged about the secrecy in early October, long after it was clear the committee was likely going to fail.
Behind closed doors or not, without a real-world, immediate consequence-forcing action, the gaps were too wide to bridge, and each side may feel better off for not leaping.
For the GOP, any deal meant agreeing to real revenue -- Democrats had lowered their demand to $400 billion out of the $1.2 trillion in savings required -- but the idea of raising any taxes at all is toxic to the GOP base and lawmakers who have signed Grover Norquist's anti-tax pledge.
Democrats, meanwhile, would have had to accept substantial entitlement cuts. They had signaled they were prepared to extract savings from providers in Medicare, and had also expressed support for an even more controversial White House-backed idea to change the way inflation is measured for cost of living adjustments. Tabulating COLAs based on the "chained" inflation measure would take close to $200 billion in Social Security cash alone out of the pockets of the elderly and the middle class.
But doing so would eliminate one of the Democrats most powerful arguments going into the next election: that it was the Republicans who wanted to slash Medicare and Social Security. It would have cost them their argument that they are the ones saving the safety net.
"Look at the Affordable Care Act," said Max Richtman, CEO of the National Committee to Preserve Social Security and Medicare. "That was a law that did a lot of good things for seniors, but the prevailing message was Democrats cut a half a trillion dollars out of your Medicare, and a lot of Democrats lost their seats -- and it wasn’t even true."
"If they [Republicans] can point to something concrete -– that Democrats offered to cut seniors’ COLA -- then even if it doesn’t happen, it’s a political liability," Richtman said. "Here you’ve got Democrats talking about doing something that would cut Social Security. Would that hurt them? I don’t see how it doesn’t."
A poll released Friday by Lake Research Associates found that 72 percent of the country -- across party lines -- opposes changing COLAs.
Democrats never put their plan in writing, so they may be spared. In fact, they may have won the day the super committee was first created, because if the automatic cuts do kick in, entitlement programs will be spared. Democrats would also have the leverage of those expiring Bush-era tax cuts.
There are other major issues that will have to be resolved that come with real, immediate impacts. The current cuts to the payroll tax are set to expire at the end of this year, emergency unemployment insurance is due to run out, and Congress has to find ways to deal with legislatively mandated cuts to physician payments in Medicare. It also must prevent the alternative minimum tax from kicking in at levels that dramatically hike taxes for the middle class.
All will likely prove battlegrounds for the larger philosophical struggle over taxes and spending.
Still, the American people will benefit in one way from the failure of the super committee: the even bigger decisions about deficit reduction will have to be made in the light of a presidential election year, and both sides will have to state their cases to a suddenly more motivated electorate, with Tea Party fervor being matched by rising anger over income inequality and the growing Occupy Wall Street movement.
Ultimately, the voters will get their say, instead of 12 people with super legislative powers.
UPDATE: The failure is official. The panel's co-chairs released the following statement on Monday afternoon:
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.
Despite our inability to bridge the committee's significant differences, we end this process united in our belief that the nation's fiscal crisis must be addressed and that we cannot leave it for the next generation to solve. We remain hopeful that Congress can build on this committee’s work and can find a way to tackle this issue in a way that works for the American people and our economy.
We are deeply disappointed that we have been unable to come to a bipartisan deficit reduction agreement, but as we approach the uniquely American holiday of Thanksgiving, we want to express our appreciation to every member of this committee, each of whom came into the process committed to achieving a solution that has eluded many groups before us. Most importantly, we want to thank the American people for sharing thoughts and ideas and for providing support and good will as we worked to accomplish this difficult task.
We would also like to thank our committee staff, in particular Staff Director Mark Prater and Deputy Staff Director Sarah Kuehl, as well as each committee member's staff for the tremendous work they contributed to this effort. We would also like to express our sincere gratitude to Dr. Douglas Elmendorf and Mr. Thomas Barthold and their teams at the Congressional Budget Office and Joint Committee on Taxation, respectively, for the technical support they provided to the committee and its members.
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