For real budget hawks, the failure of the congressional super committee to reach an agreement on a second round of budget cuts is excellent news. If Congress remains stuck in gridlock, $1.2 trillion in automatic cuts go into effect. This won’t stop the United States from piling up further debt.
But, continuing gridlock would lead to the expiration in 2012 of the tax cuts passed under President George W. Bush and extended by President Barack Obama as part of his economic stimulus plan.
The reversion to the old tax rates could raise an additional $3 trillion in revenue over 10 years. In combination with spending cuts, that is enough to stop the growth of the nation’s $15 trillion debt.
The super committee was the result of a last-minute deal in July to raise the debt ceiling as the government was running out of money to pay its bills. About 40 percent of federal spending is paid for with borrowed money. In addition to raising the debt ceiling, Congress approved $917 billion in spending cuts over 10 years. The super committee was supposed to cut $1.5 trillion more.
The problem with doing nothing is that there are other budget issues that need attention. If Congress does nothing before the end of the year, doctors will see their payments drop by 27 percent for treating Medicare patients.
Unless $22 billion in savings can be found, extended unemployment benefits will end, as will the partial holiday on Social Security payroll withholding taxes.
Cutting Medicare payments likely will lead to fewer doctors accepting Medicare patients.
Ending extended unemployment benefits and reductions in payroll taxes will add to the personal hardship of the 14 million jobless, as well as remove money and spending from a weak economy.
Obama wants to pay for renewing the payroll withholding tax break by adding a surcharge on the wealthiest taxpayers. Republicans oppose that.
If Republicans don’t compromise, they may fail to save the Bush tax cut for top incomes. When the super committee was formed, it was argued that Republicans would compromise to save the defense budget from sharp cuts.
Congressional Democrats’ refusal to consider cuts and changes in entitlements such as Medicare and Social Security, and Republican opposition to tax cuts proved insurmountable hurdles to compromise.
It is a stalemate that defies logical solutions, and may last until after the 2012 elections.
— New Haven (Conn.) Register
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