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The debt supercommittee: A guide to the rhetoric

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J. Scott Applewhite/AP

"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.”

— Sen. Patty Murray (D-Wash.) and Rep. Jeb Hensarling (R-Texas), joint statement, Nov. 21, 2011

 

To no one’s surprise, the debt “supercommittee” on Monday officially gave up in its efforts to forge a bipartisan agreement. The process was magically designed to almost certainly fail, given the vast divide between the two parties on issues such as taxes and entitlement programs. In theory, Congress is now obligated to go forward with $1.2 trillion in cuts to discretionary spending, but the cuts do not take effect until January 2013 — meaning Congress gets time to adjust the numbers.

 Given all of the fingerpointing, here is a guide to some of the Pinocchio-laden rhetoric.

 “Simpson-Bowles worked for thousands of hours, bipartisan, Republican, Democrat, people outside of the Senate and elected politics. They came out and said in order to do a deal, you need $4 trillion and you need 2 trillion [dollars] of it as revenue.”

— Sen. John Kerry (D-Mass.), on Meet The Press, Nov. 20, 2011

Kerry is referring to the National Commission on Fiscal Responsibility and Reform, which was co-headed by Alan Simpson, a former GOP senator from Wyoming, and Erskine Bowles, former chief of staff to President Bill Clinton.  

In Kerry’s telling, the commission called for half of the $4 trillion in deficit reduction over 10 years to come from new tax revenues. This was a major sticking point in the supercommittee talks, because Republicans offered to raise some new revenue but would not agree to allow tax cuts passed by George W. Bush to expire.

 But the final report of the commission actually called for about $1 trillion in new revenues, mainly through what it called “comprehensive tax reform.” (There was an additional $138 billion in new revenue dedicated to Social Security.) Cuts in spending, by contrast, were $2.2 trillion.

One could also attribute some portion of the interest savings to the additional revenue, but by and large the Simpson-Bowles commission called for much more in spending cuts than in tax increases.

So why the difference? The commission operated off what it called a “plausible baseline,” a budgetary term of art that tried to account for how Congress might act on laws currently on the books. A Kerry aide said he was referring to a different baseline that assumes a continuation of current policy, which brings the revenue gained from the Bowles-Simpson proposal up to $1.9 trillion. The aide acknowledged that current law would probably change.

 If lawmakers appear to be talking about different budget numbers, that usually means they are talking about different baselines. 

  “But in our plan, the wealthiest Americans would pay more taxes than they do now.”

— Sen. Jon Kyl (R-Ariz.), on Meet the Press, Nov. 20, 2011

With the word “now,” Kyl is using sleight of hand here to disguise the fact that Bush era tax cuts are due to expire at the end of 2012. Republicans want to extend the tax cuts, which were originally supposed to run out in December 2010.

Instead of allowing the cuts to lapse, Republicans on the committee proposed about $300 billion in new revenue over 10 years, which included reforms to cut marginal tax rates and also place a cap on so-called tax expenditures. (We had highlighted the plan used in this proposal in an examination of tax expenditures published in August.)

 On the surface, the cap on tax expenditures would seem to hurt wealthier Americans but the liberal-leaning Center on Budget and Policy Priorities argued in a report last week that the rate cuts would mainly benefit the affluent while the tax expenditure limitation actually made the tax system more regressive.

  “They demanded higher taxes and even more stimulus spending, even though President Obama and other Democrats have acknowledged that taxes should not be raised in a recession.”

— Republican National Committee Chairman Reince Priebus, in a statement, Nov. 21, 2011

 Memo to the RNC: The recession officially ended in June 2009, as calculated by the National Bureau of Economic Research. Clearly the economy is still struggling, but it is not in a recession under conventional calculations.

When Priebus says “they demanded higher taxes” that actually means that Democrats demanded the current law not be changed — and so the Bush tax cuts would expire, per a bipartisan agreement reached earlier in Obama’s presidency.

  However, Democrats want to keep the Bush tax cuts for people making under $250,000 a year, so they would be partially extended. Finally, the tax cuts expire at the end of 2012, so that is more than a year away, when the economy might be in better shape.

 

“Before Congress leaves next month we have to work together to cut taxes for workers and small business owners all across America. If we don't act, taxes will go up for every single American, starting next year, and I'm not about to let that happen.”

— President Obama, speaking to reporters, Nov. 21, 2011

Here the president plays the same game that Priebus does, arguing that the expiration of a law at the end of this year (which for one year reduced payroll taxes) will result in higher taxes. Actually, the expiration of the law means payroll taxes would be restored to their normal level. Given that the payroll taxes are used to fund Social Security and Medicare, it is reasonable to question whether Obama’s proposed extension is good long-term economic policy.

 Obama’s use of this phrasing gives him little cause to complain about the RNC’s rhetoric about “demanding higher taxes.”

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