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.