At one of the first supercommittee meetings, back in September, CBO director Douglas Elmendorf sketched the problem at hand: “Given the aging of the population and rising costs for healthcare, attaining a sustainable Federal budget will require the United States to deviate from the policies of the past 40 years in at least one of the following ways,” he said. “Raise Federal revenues significantly above their average share of GDP, make major changes in the sorts of benefits provided for Americans when they become older, or substantially reduce the role of the rest of the Federal Government relative to the size of the economy.”
In short, Elmendorf said the federal government can’t keep doing what it’s doing with revenues so low. So either raise taxes, or get ready for some deep and painful cuts. The likes of Grover Norquist, who has bedeviled the committee, would clearly prefer the latter result—he reaffirmed on 60 Minutes this weekend that he’d be fine with a federal government in 2011 that looks like the federal government of 1911.
Republicans set off on finding some way to both preserve low tax rates and cut as much as they could in order to help pay for it. This whole supercommittee charade was never about deficit reduction for Republicans but protecting low taxes, particularly for the very wealthy—that became abundantly clear when their final offer involved a permanent extension of the budget-busting Bush tax cuts.
To their credit, Democrats would not assent to any such extension. On NBC’s Meet the Press, Senator John Kerry, a member of the supercommittee, explained that the “most significant block to our doing something right now, tomorrow, is their insistence, insistence, insistence on the Grover Norquist pledge and extending the Bush tax cuts.” The Democrats offered up some awful deals during the course of supercommittee negotiations, but they deserve some credit for not budging on taxes.
The Bush tax cuts, you may recall, will expire at the end of 2012. So the central battle that divided the supercommittee has yet to be resolved. While Democrats showed gumption in not using the supercommittee to extend the Bush cuts, nor lock in a new tax policy that’s just as bad, they’re going to need to stand just as firm next year.
That’s because the Democrats can’t just stand pat, and let the tax cuts expire automatically—that would be easy. But under that scenario, all the Bush tax cuts would expire, including those on the middle class, and during a recession—not to mention on the brink of a presidential election—Democrats will simply not allow that to happen.
Some kind of bill addressing the Bush tax cuts will have to be passed by the end of next year, and Republicans will definitely try to force the issue before the November elections. It wasn’t done last December, when the Bush rates were first set to expire, and it didn’t happen with the supercommittee, but sooner or later, Congress will have to either kill the Bush rates or make them permanent—and thus choose between two radically different versions of a federal government. The supercommittee has now become nothing but a footnote in that ongoing battle.