Posted by Shyam Moondra
When President Barack Obama and House Speaker John Boehner couldn’t agree on a grand deficit reduction plan, which would have reduced deficit by $4.5 trillion over ten years, they kicked the can down to the Senate and House. When Congress couldn’t reach an agreement, they appointed a Super Committee, consisting of six Democrats and six Republicans evenly divided between the Senate and House, to come up with a plan to reduce deficit by $1.2 trillion over ten years which would then be voted up-or-down by the full Congress without any amendments or filibuster. And if they failed to agree on a plan, there would be automatic cuts in discretionary spending worth $1.2 trillion of which about $500 billion would be realized by slashing the defense budget.
As of now, it looks highly unlikely that the Super Committee would agree to any plan. This would represent a colossal failure on the part of Congress that had a record-low approval rating of just 9% going into the Super Committee deliberations. Last time, when Congress failed to agree on the debt ceiling plan, S&P reduced the rating of U.S. government securities from AAA to AA+ and the stock market crashed by over 1,000 points. This time, market may not react that badly because the expectations are so low from this “do nothing” Congress. Everyone knows that it would be a miracle if the Super Committee could somehow wave a magic wand and overcome political gridlock.
Republicans are insisting that the income tax cuts for the rich enacted by President George W. Bush be made permanent, which is, of course, vehemently opposed by Democrats. The Democrats argue that the rich benefited the most under Bush and, therefore, they should also share in the pain of balancing the budget. Republicans’ intransigence on the issue of tax increase is remarkable because an overwhelming majority of the voters, including many Republicans, in fact support the idea of making rich people pay more in taxes to bring down deficit. Unfortunately, many Congressional Republicans signed a pledge to not vote for any tax increases; this pledge was sought by a political organization, Americans for Tax Reform, which is funded mostly by wealthy individuals and foundations. Many Republicans understand that the current level of deficit and debt can’t be reduced just by spending cuts and that some tax increases would be necessary. However, they are afraid to speak up in favor of tax increases because they fear retaliation from Americans for Tax Reform which could jeopardize their chances of getting re-elected. Republicans are indeed stuck between a rock and a hard place.
Now it looks like the tough issues of budget deficit and debt wouldn’t be addressed until after the 2012 election. Republicans have put themselves in a Pandora box – they are resisting tax increases for the rich even in the face of strong support from many of their own constituents. It’s hard to see how Republicans could stand to gain in 2012 from their impractical position. Ultimately, it would now be up to the American people, who would have to vote wisely. In 2012, the voters must elect people who would listen to their constituents, be willing to compromise, and do what is best for the country, even in the face of threats of retaliation from a lobbyist organization.
