The members of the super committee officially announced a failure to reach a deal on cutting at least a $1.2 trillion hole in the federal budget deficit, ahead of its official Nov. 23 deadline. The move has sent lawmakers searching for a new plan and ways to dodge blame.
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, committee co-chairs U.S. Sen. Patty Murray, D-Wash., and U.S. Rep. Jeb Hensarling, R-Texas, said in a joint statement.
The news comes after nearly three months of legislative wrangling over what sort of shape the deficit reduction would take. The Bush-era tax cuts became the fulcrum point for the negotiations, with Republicans submitting a plan to permanently extend them to all income levels, which the Democrats rejected immediately.
The super committee, formally known as the Joint Select Committee on Deficit Reduction, was established as part of a deficit reduction deal, the Budget Control Act, in exchange for raising the nation's debt ceiling on Aug. 2. While the government was allowed to borrow up to $2.4 trillion more through 2013, the super committee was charged with reaching a bipartisan consensus on $1.2 trillion in deficit reduction over the next decade, in addition to the roughly $900 billion in deficit reduction Congressional Republicans and President Barack Obama agreed to as part of the August debt deal. Congress had until Dec. 23 to pass any recommendations, otherwise trigger cuts, in the form of slashes to defense spending and Medicare benefits, would be automatically enacted.
Reasons for Failure
The reasons for the committee's failure are myriad, according to Dean Zerbe, former Senior Counsel and Tax Counsel for the U.S. Senate Committee on Finance and current national manager of alliantgroup.
It looks and feels like you're talking about folks who are genuine in their desire for a deal but there was a chasm, said Zerbe, who also worked on several pieces of tax legislation from 2001 to 2004. It's unfortunate there wasn't a way to craft something that would make everyone happy and personally happy.
Now Congressional Republicans and Democrats, who each assigned six of their own lawmakers to the 12-member committee, are seeking ways to duck responsibility for its failure. Members of the super committee spent Sunday morning lamenting the missed opportunity and taking shots at the opposing party.
Our Democratic friends were never able to do the entitlement reforms, U.S. Sen. and committee member Jon Kyl, R-Ariz., said during Meet The Press. They weren't going to do anything without raising taxes.
U.S. Sen. John Kerry, D-Mass., rebuffed Kyl's allegations, calling them patently untrue, blasting Republican plans that would extend Bush-era tax cuts.
We didn't come here to do another tax cut to the wealthiest people while we're [asking] fixed-income seniors to ante up more, people on Medicaid who are poor to ante up more, he said.
Republican co-chair of the super committee, U.S. Rep. Jeb Hensarling, R-Texas, lamented the missed shot at righting the nation's fiscal ship.
It wasn't so much of a failure as it was a failure to seize an opportunity. [. . .] This nation better seize another one or we will be in big economic trouble, he said on Fox News Sunday.
Adds to Negative Data Point from Europe
The committee's letdown adds to an already perilous economic climate that has seen the Eurozone Crisis cause uncertainty among investors.
Unfortunately, it appears that the only catalyst to force a deal at this point would be a negative market reaction. Both sides have made the political calculation that they have the upper hand resulting from failure and will pivot towards messaging blame towards the other party, said Edward Mills, an analyst at FBR Capital Markets.
The uncertainty caused by the super committee's failure caused markets to fall at the onset of Monday's trading, with the Dow Jones industrial average down 327 points as of noon, the S&P down 31 and Nasdaq falling 67.
As is the case with policymakers in Europe, U.S. politicians need to be doing more than investors expect, not less, Michael Gapen, senior U.S. economist with Barclays Capital, told Reuters.
Some lawmakers are now acting to stop automatic trigger cuts set in place to bore a $1.2 trillion deficit reduction out of equal chunks of military and domestic spending over the next decade, set to take effect in 2013. The cuts were meant as an incentive to iron out a deal, taking away government funding cherished by both parties.
Legislators are looking for a way to negate those cuts, with the push from Defense Secretary Leon Panetta exemplifying among the many that have sought to exert influence over the super committee's decision. U.S. Sens. John McCain, R-Ariz., and Lindsey Graham, R-S.C., are reportedly writing legislation that would undo what they call devastating cuts to the military.
U.S. National Debt at $15 Trillion
Its demise represents the second time the United States' government has failed to come up with a long-term solution to a growing budget deficit problem, which reached $15 trillion last week. The first hiccup came after negotiations over raising the debt ceiling between President Barack Obama and House Majority Leader John Boehner, R-Ohio, collapsed in August.
The inability to forge what was initially reported to be a $4 trillion grand bargain led to the United States' first every credit downgrade by Standards & Poor's. Instead of a broad deal, lawmakers agreed to a stopgap increase and the super committee.
The road to Monday's deadlock was long, with Congressional members of both parties, as well as leadership, offering varying degrees of support.
At the onset, party and Congressional leaders met with the co-chairs of the super committee, Hensarling and U.S. Sen. Patty Murray, D-Wash., to guide initial talks.
Boehner expressed hope the committee could find some middle ground on Halloween Day. But the support for a positive outcome was not consistent. Three days after the Speaker's remarks, 33 Republican senators sent released a letter warning against any revenue increases in any plan.
U.S. Sen. Chuck Schumer, D-N.Y., then called the super committee's viability into doubt on Morning Joe on Nov. 7, saying Republican intransigence on tax increases would eventually lead to its demise.
After largely clandestine talks, Democrats opened the negotiations with a $3 trillion proposal that was largely spending cuts with revenue increases. Republican members countered with a $2.2 trillion proposal largely based around spending cuts that Democrats immediately shot down.
In early November, reports spoke of a bipartisan gang of six forming within the super committee, working toward a deal. Those talks never materialized into a substantive proposal.
At one point, the super committee reportedly mulled putting off tax decisions, handing down a broad outline for revenue goals that the appropriate House and Senate committees would enact.
Talks stalled after U.S. Sen. and committee member Pat Toomey, R-Penn., offered a plan in the last week of negotiations that cut the deficit largely through spending cuts.
Toomey's plan largely aimed to increase revenue by limiting the number of deductions the wealthy can factor into their tax returns. But in what became the eventual sticking point, it permanently extended the Bush-era tax cuts across the board, including for the wealthiest earners, which Democrats vehemently opposed. Their $2.3 trillion counteroffer, a mixed bag of revenue increases and cuts, was also quickly shot down.
Talks never seemed to recover from that point, with Democrats largely demurring at producing a counter offer, claiming Republicans had no plan to substantively increase revenue through tax hikes.