Will it be a tragedy if the Super Committee fails to agree on a proposal by next week’s deadline? Yes, but not for the reasons that you’ve heard.
The conventional story is that the committee’s failure to come up with an agreement will have catastrophic effects, sending a signal that the country is not serious about reducing the deficit and, as a result, spooking investors and chilling the economy. As my colleague Tim Noah keeps pointing out, that seems highly unlikely. Last summer’s debt ceiling debate spooked the markets, but only because, thanks to the Republicans, the country was about to stop making good on its debts. More important, if the super-committee fails to come up with its own deficit reduction package, then automatic spending cuts are supposed to take effect.
Of course, they’re supposed to take effect January 1, 2013 – and it’s possible, some would even say likely, Congress would revisit those cuts before they take effect, most likely in a lame duck session after the next election. But it’s not like the super-committee is on the verge of making a sensible deal anyway.
Republicans refuse to consider new revenue, except in token amounts and in exchange for making all of the Bush tax cuts permanent. Democrats insist upon new revenue to balance spending cuts and want the Bush tax cuts on upper incomes to end. That's a much better approach but still far from ideal. The best option right now is to let all of the Bush tax cuts expire.
As Merrill Goozner wrote this week in the Fiscal Times, "the failure to come up with a compromise plan may represent the best of all possible outcomes for those looking for long-term answers to the nation’s fiscal imbalances." Today in the Washington Post, E.J. Dionne echoes those sentiments. "A balanced deal would be nice but it’s now impossible ... a “failure” by the supercommittee to endorse a deeply flawed deal is actually a victory for sensible deficit reduction."
OK, but then what’s the tragedy? It's the graph above -- i.e, the subject the super-committee isn’t discussing. Jobs.
For the last week or so, all Washington has talked about is proposals for reducing the deficit, a very serious problem but not our most immediate one. The urgent priority right now should be putting people back to work. The ideal way to do that would be to spend money now – on bridges, aid to the states, targeted tax cuts, and such – and save money later. And plenty of people, in and out of Congress, urged the super-committee to take up such a plan. It never did.
It’s not surprising that the conversation has shifted back to deficits. The super-committee deadline gives the media a story to hype breathlessly. And President Obama, who has been pushing the conversation back onto employment, is out of the country right now. He returns soon and, next week, he’ll travel to New Hampshire to give another speech about his jobs proposal. Hopefully that will remind people in Washington of what most people outside Washington already know: The super-committee is just a sideshow.