Wonkbook: What to watch in the ‘supercommittee’

at 07:50 AM ET, 11/15/2011

We’re just over a week from the Nov. 23 deadline for the Joint Committee on Deficit Reduction — better known as the “supercommittee” — to report out a deal. In fact, there’s less time than that, as anything the panel comes up with must be assessed by the Congressional Budget Office, which needs at least a couple of days to run the numbers. So this is the final countdown. And as of now, the supercommittee isn’t even close.


Rep. Jeb Hensarling, R-Texas, left, and Sen. Patty Murray, D-Wash., right, co-chairs of the Joint Select Committee on Deficit Reduction, wrap up a meeting in September. (J. Scott Applewhite - AP)
Perhaps the members will reach a deal, and quickly. Perhaps they’ll give up and admit failure. Or perhaps the panel will run long and a lot of political reporters, congressional staffers, lobbyists, think-tankers and assorted other Washington types will see Thanksgiving ruined.

So there is, as you might expect, quite a bit of tea-leaf reading happening around town. Here’s what the smartest of the supercommittee-ologists are watching:

The weakness of the “trigger”: The reason the panel was to succeed where other bipartisan negotiations have failed was the “trigger.” The inability of the two sides to reach a deal would trigger $1 trillion in automatic cuts over the next 10 years. Half of that would come from domestic spending, although Social Security, Medicaid and a few other programs for low-income Americans would be protected. The other half would come from the Pentagon.

But increasingly, no one fears the trigger. If it is activated, Republicans have spoken openly about undoing the defense cuts — and the White House and congressional Democrats would happily sign on. But the White House won’t allow the defense cuts to be lifted if the other side of the trigger — domestic cuts — isn’t also defused. So it’s simple to imagine the coalition that will disarm the trigger.

Democratic divisions: Last week it was reported that the Democrats on the committee had offered a new proposal. As it turned out, some of the Senate Democrats had offered one. Asked about the plan on “Fox News Sunday,” Rep. James E. Clyburn (D-S.C.) was clearly annoyed. “There are six Democrats on this committee,” he said. “And though I have a great deal of admiration and respect for all of them, the fact of the matter is, Democrats have not coalesced around a plan.” Right now, the smart money is on the final vote having either four Democrats — Sens. Patty Murray (Wash.), Max Baucus (Mont.) and John F. Kerry (Mass.), plus Rep. Chris Van Hollen (Md.) — or none. The six Republicans, meanwhile, are expected to vote as a bloc.

Sen. John F. Kerry: But if any Democrat is going to break from his colleagues, it’s Kerry. When Kerry was appointed to the 12-member supercommittee, the prevailing theory was that he was there to hold the line for liberals. As it turns out, he’s the Democrat who seems most interested in cutting a deal — and who is causing liberals the most heartburn.

The George W. Bush tax cuts: The Republicans’ initial line in the sand was no new net revenue. That is to say, they were willing to discuss tax reform, but only if it didn’t increase the total revenue flowing into the federal government. That was a non-starter for the committee’s Democrats. Last week, the Republicans, led by Sen. Patrick J. Toomey (Pa.), offered a proposal that included about $300 billion in new revenue but paired it with the full extension of the Bush tax cuts. In other words, if Democrats were willing to trade $300 billion in new taxes for $3.7 trillion in tax cuts, Republicans would take the deal. Democrats haven’t bit. Yet.

Lack of interest from the ratings agencies: Much of the supercommittee’s early urgency came from Standard & Poor’s downgrade of the United States’ credit rating. Since then, it has become clear that the major rating agencies don’t much care what the committee does or doesn’t do. “At this point there is little reason to believe that either S&P or Moody’s would downgrade solely based on a failure to agree,” Goldman Sachs said in a recent analysis. “Both rating agencies have indicated that while a stalemate in the supercommittee would be negative, they expect $1.2 trillion in planned deficit reduction to materialize through automatic cuts if not through the supercommittee, so their fiscal outlook should remain unchanged.” The one exception is if the supercommittee fails and the trigger is pulled. In that case, they might act.

Lack of interest by the White House: For most of this year, the White House has thought that the surest path to President Obama’s reelection was to strike a big deficit deal with Republicans, or at least be seen trying to strike a big deficit deal with Republicans. The debt-ceiling debacle proved it wrong. The White House was unable to reach an agreement, and the sorry sight of its ineffectual efforts led it to sink in the polls. Since then, it has moved toward a more confrontational stance with the GOP, and has seen its poll numbers tick up slightly. So White House officials do not consider a supercommittee deal crucial to their chances. Perhaps that’s for the best, as the Democrats on the supercommittee think it would be harder to secure Republican support for a deal if the White House were more involved.

Jobs spending: Early on, liberals hoped that the supercommittee would become a vehicle for more jobs spending, either because that’s what was required for Democrats to sign off on a deal or, more optimistically, because representatives from both parties would come to see further stimulus spending as necessary. That looks increasingly unlikely. It’s still possible that a deal could include an extension of the current unemployment insurance funding and payroll tax rates, but it’s not likely that it would include much more.

2012: Ultimately, what happens in the supercommittee depends on what the two parties think will happen next year. If the consensus is that Obama is likely to win reelection, Republicans will be more open to a deal now, and Democrats will be less likely to make big concessions. If the consensus is that Mitt Romney is likely to be the next president, Republicans will see little reason to make concessions now, but Democrats might want to lock in a deal while they still control the White House. The best scenario is one in which both parties are worried about next year, and so prefer a mediocre deal now to the possibility of the other party deciding the terms later.

Top stories

1) The Supreme Court will rule on health care reform, reports Robert Barnes: "The Supreme Court decided on Monday to review President Obama’s 2010 health-care overhaul, promising a high-profile hearing on the question dominating American politics: the constitutional limits of the federal government’s power...The court accepted appeals from a decision by the U.S. Court of Appeals for the 11th Circuit in Atlanta -- the only appellate court to say the law is unconstitutional -- in a case filed by a business group and 26 states that object to the legislation. Justices said they will consider: Whether Congress was acting within its constitutional powers by requiring all Americans to have at least a basic form of health insurance by 2014...Whether other parts of the law can go forward if the 'individual mandate' is found unconstitutional."

Sarah Kliff tells you everything you need to know about the health-care lawsuits up to this point, and going forward: http://wapo.st/t1WzGv

2) It looks like Congress has got a spending deal, reports David Rogers: "A spending package of more than $182 billion took final shape late Monday after an intense week of House-Senate negotiations that posed a first test of how the two political parties will implement appropriations caps agreed to in the August debt accord. Republicans gave back more than $1 billion that the House had previously cut from food programs at home and overseas, even as the GOP betrayed its own appetite for increased science and infrastructure funding. Democrats protected Amtrak and community policing priorities, yet in a blow to Wall Street reforms, were forced to accept a one-third cut from President Barack Obama’s budget request for the Commodity Futures Trading Commission."

3) A supercommittee deal will likely rely on war savings, reports Lori Montgomery: "The congressional 'supercommittee' is looking to count as budget savings as much as $700 billion that the nation no longer plans to spend on the wars in Iraq and Afghanistan over the next decade, an accounting gimmick that has drawn fire from both Democrats and Republicans. In deference to that criticism, aides from both parties said the panel would not count war savings toward its primary debt-reduction goal of at least $1.2 trillion. Instead, they are considering using the savings to 'pay for' other priorities, such as extending emergency unemployment benefits and a temporary payroll tax cut currently enjoyed by every American worker. Both measures are scheduled to expire at the end of this year, potentially damaging the fragile recovery -- an outcome that President Obama and other Democrats are eager to avoid."

4) The European Central Bank actually worked against Italy as its debt crisis worsened, reports Howard Schneider: "As Italy’s borrowing costs spiked and its government neared collapse last week, the European Central Bank reacted in an unusual way for an organization serving as the euro region’s chief financial fire brigade. It slowed its purchases of government bonds, a step that likely contributed to the jump in Italy’s interest rates above the 7 percent threshold and arguably hastened Prime Minister Silvio Berlusconi’s departure as Italian politicians rushed to contain the country’s growing financial risks. According to ECB statistics released Monday, the bank cut its purchases of government bonds last week to about $6 billion, only half the amount of the week before."

Top op-eds

1) The Supreme Court ruling on health care will be very broad in scope, write Simon Lazarus and Dahlia Lithwick: "The court also agreed to hear a fourth issue, also for an hour: the claim of the 26 Republican state officials that the ACA’s expansion of Medicaid coverage should be struck down, on the ground that it unconstitutionally 'coerces' state governments. Potentially, the court’s disposition of this issue could cripple the federal government’s capacity to promote national policy goals more gravely than even a decision to overturn the ACA individual mandate, and thereby limit congressional authority to regulate interstate commerce...Also vulnerable could be antidiscrimination guarantees prescribed by conditional funding programs such as Title VI of the Civil Rights Act and Title IX of the Education Amendments of 1972...and the Individuals With Disabilities Education Act."

2) Neuroscience could change how we fight poverty, writes Jonathan Cohn: "A scientific revolution that has taken place in the last decade or so illuminates a different way to address the dysfunctions associated with childhood hardship. This science suggests that many of these problems have roots earlier than is commonly understood--especially during the first two years of life. Researchers, including those of the Bucharest project, have shown how adversity during this period affects the brain, down to the level of DNA--establishing for the first time a causal connection between trouble in very early childhood and later in life. And they have also shown a way to prevent some of these problems--if action is taken during those crucial first two years. The first two years, however, happen to be the period of a child’s life in which we invest the least."

3) Overspending wasn't behind Bush's fall from popularity, writes Ramesh Ponnuru: "Republicans believe that their 2010 election victories were rewards for returning to the true path of conservatism that they had left in the Bush years...If Republican overspending drove voters away, they should have lost support first among conservatives. But there was no sign of a demoralized base in 2006. Exit polls found that self- identified Republicans made up a healthy 36 percent of the electorate that year, and they voted for the party’s candidates by roughly the same huge margin they had voted for them in the banner Republican year of 2004. It was among independent voters that Republicans got slaughtered...It seems much more likely that Republicans lost in 2006 because of the bleeding in Iraq, corruption in Washington, [and] wage stagnation.

Enchantment Under the Sea interlude: Michael J. Fox plays "Johnny B. Goode" live at a Parkinson's benefit.

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Still to come: Why Italy is probably doomed in any case; a Florida waiver request could derail health care reform; the supercommittee deal will likely rely on war savings; the Keystone pipeline is definitely being rerouted; and a time lapse video of Dubai.

Economy

Een with Berlusconi gone, Italy is still in serious trouble, reports Brad Plumer: "To prevent an implosion, Italy first needs some deep-pocketed entity to backstop its debt, placate the markets, and give Italy time and space to carry out longer reforms. Yet the deepest-pocketed entity around, the European Central Bank, seems unwilling to play this role. Instead, the ECB has been buying up Italian bonds sporadically, while telling everyone that it hates doing so. 'It’s a stupid way to do it,' says Paul De Grauwe of Belgium’s University of Leuwen. 'The ECB is sending a signal to the market that as soon as it stops buying, bond prices will go back up -- which tells investors that it’s better to sell today than tomorrow. The ECB is maximizing the probability that its strategy will fail.'...Even if the market panic subsides, Davies writes, Italy still needs to 'embark on a credible plan to earn a primary budget surplus of over 5 percent of GDP for several successive years at least.'"

Eric Cantor doesn't want a clean balance budget amendment, reports Jake Sherman: "Majority Leader Eric Cantor sided with his party’s conservatives Monday, saying that he preferred that the House vote on a stronger balanced budget amendment than planned. Speaking to reporters in the Capitol Monday, the Virginia Republican said if he had his 'druthers, I would like to see us vote on the stronger BBA.' House leadership canvassed its membership roughly two weeks ago, aides said, and they decided to move forward with a balanced budget agreement that doesn’t include a spending cap and supermajority threshold for tax increases. So they’ll vote on a more straight forward balanced budget amendment -- one that would still allow taxes to be raised by a simple majority."

The FHA is looking like it needs a bailout, reports Nick Timiraos: "The Federal Housing Administration's cash reserves have fallen so low that there is a "close to 50%" chance the agency could run out of money and require a taxpayer bailout in the next year, according to the annual independent audit of the FHA's finances. The audit, to be released Tuesday by the FHA, estimated that the value of the agency's reserves stood at $2.6 billion as of Sept. 30, down 45% from an already low $4.7 billion last year. The drop reflects the impact of rising home-loan defaults amid falling home prices, which together generate greater losses on the sale of foreclosed homes. The FHA's perilous state underscores one of the hidden costs of the U.S. government's extraordinary efforts to rescue the housing market.."

Best boyfriend ever interlude: Paul makes a flipbook for Emma for her birthday.

Health Care

Raising the Medicare retirement age wouldn't save much money, reports Matt Dobias: "One way to save Medicare money is to gradually boost the eligibility age from 65 to 67, eventually aligning it with the older Social Security age being phased in. The idea is popular among Republicans, some Democrats and various deficit experts. Even President Barack Obama said last summer that he could consider it as part of a comprehensive deficit-cutting package...Kaiser found that with the new health care law in place, gross savings would be $31.1 billion -- but net savings would be one-sixth of that, about $5.7 billion in 2014. That reflects the higher costs of subsidizing some of the recipients in the exchanges or covering them under Medicaid, as well as other cost shifts."

Florida's health care waiver request could have big ramifications, reports Sarah Kliff: "A seemingly obscure regulatory battle in Florida could upend efforts to implement health-care reform nationwide. At issue is a regulation requiring insurance companies to spend at least 80 percent of premiums on medical costs. Florida, a swing state with voters skeptical of the health-reform law, is pushing back. The state wants the Obama administration to waive the spending requirement for Florida insurers, a move that critics say would roll back a crucial consumer protection in the health-reform law...For many, the Florida waiver is a litmus test of how aggressively the Obama administration will implement the law, especially in a state that’s hostile to it."

Health reform is changing the health industry in ways the Supreme Court can't reverse, report Reed Abelson, Gardiner Harris and Robert Pear: "No matter what the Supreme Court decides about the constitutionality of the federal law adopted last year, health care in America has changed in ways that will not be easily undone. Provisions already put in place, like tougher oversight of health insurers, the expansion of coverage to one million young adults and more protections for workers with pre-existing conditions are already well cemented and popular. And a combination of the law and economic pressures has forced major institutions to wrestle with the relentless rise in health care costs. From Colorado to Maryland, hospitals are scrambling to buy hospitals. Doctors are leaving small private practices."

Domestic Policy

There's no one leader who could force a supercommittee deal, reports David Fahrenthold: "For two months now, 12 members of Congress have sat in a windowless room stocked with granola bars and two coffeemakers, trying to remember how Congress is supposed to work. So far, no luck. And time is running short. The job of the congressional 'supercommittee”'-- charged with cutting $1.2 trillion from the country’s deficit -- is to rekindle the possibility of the great big bipartisan deal, made by the big wheels in Congress. Now, it seems, nobody is big enough. One major reason for the committee’s struggles is that members are often strangers to one another, carrying little of the personal trust that made previous deals possible. And even the most powerful leaders are weaker than past bosses -- uncertain that their party will follow if they try to lead."

Millionaires earn billions in benefits, reports Ed O'Keefe: "As the congressional supercommittee struggles to develop comprehensive plans to address the nation’s fiscal woes, a Republican senator is suggesting they look at the billions of dollars in federal benefits collected annually by the nation’s millionaires. On average, Americans earning more than $1 million annually receive a combined $1.6 billion in federal benefits and $28.5 billion in tax credits annually, Sen. Tom Coburn (R-Okla.) says in a new report published by his office, 'Subsidies of the Rich and Famous.' Coburn -- a frequent critic of federal spending -- argues that Congress and the White House should target federal benefits paid to millionaires instead of focusing on their tax rates."

Time lapse interlude: 24 hours in Dubai.

Energy

The company behind the Keystone pipeline is working on changing its route, reports Steven Mufson: "TransCanada said Monday that it will work with Nebraska on a new route for its controversial Keystone XL pipeline that would avoid the Nebraska Sandhills, a unique area of sand dunes, grasslands and wetlands. Alex Pourbaix, TransCanada’s president of energy and oil pipelines, said he expects that the new route would stay as close as possible to the previous proposed route while avoiding the Sandhills, and in return he expects that Nebraska officials will back the project...The State Department responded to Pourbaix’s offer by saying 'nothing has changed in the process since Thursday’s announcement.'"

The EPA is rolling out a number of new rules next year, reports Erica Martinson: "The Obama Environmental Protection Agency will have a busy 2012, proposing, finalizing, implementing and defending one rule after another, right through Election Day. Just don’t expect the rules’ real-world impact to play out before next November -- whether those turn out to be job losses, job creation or both. The rules contain long-term compliance deadlines, and nearly all will move through the court system, where some already are tied up in complicated litigation with parties that want to scale back, halt or stall pollution control requirements. They also have inspired a lot of activity in the House, where GOP leaders have spent the latter part of 2011 passing legislation to halt EPA air regulations and make big changes to the administrative process."

Wonkbook is compiled and produced with help from Dylan Matthews and Michelle Williams.

 
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