The deadline is approaching for the so called Super Committee to come up with a plan to cut the Federal Deficit over the next 10 years by $1.2 trillion. So what! If one listens to the media the fate of the Nation hangs on what these 12 people do. Let’s consider a few facts.
The Committee was created because congress couldn’t find a way to deal with the budget deficit. It has been stated that should the committee not reach an agreement there will be dire consequences including automatic spending cuts. Yet this doesn’t appear to be the case on any level.
If the Super Committee comes up with a plan (which few feel they will) Congress must vote to adopt the plan. The same Congress which couldn’t come up with a budget agreement in the first place. Should Congress not adopt the Committee’s plan — then, through a process called sequestration automatic spending cuts of $1.2 trillion are implemented over ten years. The sequestration cuts must be split evenly between defense and non-defense programs. When added to defense cuts already agreed-upon, total defense cuts would approach $1 trillion. It appears unlikely that this will be policitally viable.
Let’s consider a few facts. Even if there is no agreement by the Super Committee and Congress votes to allow the spending cuts to kick in there will be no impact on government spending in 2011 and very little impact on spending in 2012. The automatic cuts really won’t start until January 2013. According to the Congressional Budget Office, total federal government outlays in the next 10 years (2012-2021) are expected to be $44 trillion, while GDP will total $195 trillion. If we assume that the committee does not raise taxes at all, which means the $1.2 trillion is all spending reduction, this would equal just 2.7% of the budget, and 0.6% of GDP.
This all assumes that there is no agreement by the committee and the sequestration actually happens. Now we have congressmen suggesting a new bill to repeal the automatic sequestration in the event there is no deal! Some legislators — notably Senator McCain — have threatened to seek legislation in 2012 to unwind cuts in defence spending and perhaps nullify last summer’s deficit cutting deal entirely making the entire debate moot.
As usual the media will focus on the sensational, the short term and the negative. At best you may hear partial facts and at worst fear mongering. Our suggestion is to ignore it. We have problems in Washington and the budget deficit must be addressed but the fate of the nation does not ride with the Super Committee.
Besides there are more deadlines to worry about. Congress still must pass a budget to run the government in 2012. If Congress fails to adopt a budget (or to extend the deadline) by November 18, the federal government will shut down on that date. Perhaps not so much of a deadline as a procrastination line. Of course this is all just my opinion!
