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US Deficit Committee Fails To Agree

by Mike Godfrey,, Washington

23 November 2011

After the news that the level of United States public debt had already surpassed USD15 trillion, it was the turn of the Congressional Joint Select Committee on Deficit Reduction to announce that it had not been able to agree a plan for United States fiscal deficit reductions over the next decade, before its deadline of November 23.

The Joint Select Committee had been looking at measures, which could include spending cuts and tax reforms, to reduce the aggregate US deficit over the next decade by at least USD1.2 trillion. Failure to produce results by the deadline means that an enforcement mechanism will take effect such that equivalent spending reductions will be triggered beginning in January 2013.

Deliberations of the six Republicans and six Democrats on the Committee have been held in secret, and nothing of substance was also to be found in the final statement from its Co-Chairs, Representative Jeb Hensarling (R – Texas) and Senator Patty Murray (D – Washington), who professed themselves to be “deeply disappointed that we have been unable to come to a bipartisan deficit reduction agreement”.

Prior to the final failure by the Committee to find a bipartisan way forward, discussions abounded on the contradictory proposals that were, allegedly, being made by representatives of both the Democrat and Republican parties.

As could have been expected, the Democrats on the Committee were insisting that significant tax increases of around USD1 trillion should be part of a bigger deficit reduction programme, in order to protect spending in its favoured areas, such areas as Medicare and social security. On the other hand, while the Republicans on the Committee have said that they might accept a USD300bn increase in overall tax revenue in exchange for a reduction in the top rate of individual income tax, they were looking for more substantial cuts to the Democrats' favoured spending programmes.

President Barack Obama was forthright in his condemnation, saying that he had sent the Committee a detailed plan that would have gone above and beyond their targeted deficit reduction, reducing the deficit by an additional USD3 trillion, by cutting spending, slowing the growth of Medicare and Medicaid, and asking the wealthiest Americans "to pay their fair share”.

There are still, he added, “too many Republicans in Congress who have refused to listen to the voices of reason and compromise. They continue to insist on protecting USD100bn of tax cuts for the wealthiest 2% of Americans at any cost, even if it means reducing the deficit with deep cuts to things like education and medical research. Even if it means deep cuts in Medicare.”

On the other hand, a senior member of the Committee, Senator Pat Toomey (R – Pennsylvania) commented that he was “disappointed that we were unable to meet our goal when so many Americans were counting on us. My Republican colleagues and I proposed a compromise that offered the other side revenue as they demanded. This plan was even hailed by the second highest ranking Democrat in the Senate as a ‘breakthrough'. Like the proposals offered by other bipartisan commissions, our proposal offered a mix of spending cuts, revenue, and job-creating tax reform that would have lowered tax rates for all Americans and reduced our deficit by USD1.2 trillion. Unfortunately, our Democratic colleagues refused to agree to any meaningful deficit reduction without USD1 trillion in job-crushing tax increases."

The statement by Hensarling and Murray has, nevertheless, shed some light on a way forward, hoping that, "despite our inability to bridge the Committee's significant differences, 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”.

Representative Dave Camp (R – Michigan) continued in the same vein, commenting that, while “it is deeply regrettable that my Democrat colleagues could not see their way to addressing these much needed reforms without at least USD1 trillion in job-killing tax increases on families and employers. I will redouble my efforts as Chairman of the Ways and Means Committee to enact pro-growth tax reform that makes our tax code simpler, fairer and more competitive to generate the economic growth and jobs America needs.”

However, while it was felt that it was always doubtful whether a compromise could have been agreed by the Committee, given the current hard-line attitude of both parties, it is also now said to be difficult to envisage a plan for deficit reduction to be agreed over the coming year before next November's congressional and presidential elections.

TAGS: tax | economics | fiscal policy | social security | United States | tax reform | individual income tax

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