The SuperCommittee Fails- The Sky is Not Falling

The SuperCommittee has failed to come to an agreement.  It's been pretty obvious the last few days that this would be the case.  For me it comes as a relief, since I was concerned that Senator Kerry and other Democrats were going to give away the store in the face of Republican intransigence. 

As I look at Politico's front page, I can't even bear to read the stories about who is to blame.  I expect the "pox on both your houses" view to be the overriding narrative in the Mainstream Media.  The Dow dropped 250 points today, which is apparently due to the lack of a deal.  Let me make a few points:

• This isn't really a big deal.  The law that created the SuperCommittee also mandated automatic cuts to go into effect in the case of failure to agree.  These cuts hit the Defense budget worst of all, which is OK with me, although they hit domestic discretionary spending too, which is not so great.  But they don't touch Social Security or Medicare, which is very important.
• The Bush tax cuts are still set to expire at the end of 2012.  When that happens, the medium-term budget problems will be nearly solved, if the Democrats can just hold firm- which is a big if.
• If you want to blame someone, it's really not hard to parse the whole thing out.  Democrats insisted on a mixture of spending cuts and revenue increases to solve the budget gap.  Republicans insisted that there could not be one dime of tax hikes.  They pretended to offer some revenue increases, but said that they would only do so if the Bush tax cuts were also extended permanently, which would be a huge tax cut compared to the status quo law.  Now again, this is all OK with me- I think the Democrats would have taken a deal with token tax hikes in exchange for wholesale slashing of Social Security and Medicare, which would have been a policy and political disaster for them.  Thank God the Republicans can't take yes for an answer. 
• The MainStream Media's portrayal of the blame pie was summed up nicely by Paul Krugman a few days ago.  I can't find the passage, but it was something like: Media: The parties can't get together because Republicans won't raise taxes and Democrats won't touch entitlements. Obama: I am willing to reform entitlements in exchange for tax increases. Media:  Democrats are not willing to touch entitlements and Republicans won't accept tax increases. It's just that simple; Democrats are willing to cut spending, and seem willing even to slash social programs to get a deal, but they aren't going to do those things because they want to, they do them in exchange for something else.  Since Republicans have nothing they're willing to offer, there's not going to be a deal.

Superthoughts on the SuperCommittee

Lots of sturm and drang about the SuperCommittee, which has a deadline of Wednesday to come to agreement or face the prospect of automatic cuts to domestic programs and the defense budget.

It's become pretty clear that Republicans on that committee (and just as importantly, in the House) are not going to allow a deal that raises revenues to any significant degree.  The proposals that do manage to cut out some loopholes also include making the Bush tax cuts permanent, even though they are due to expire after 2012.  So essentially the GOP offer in the SC is to raise some taxes, while extending much more in permanent tax cuts, all in exchange for drastic cuts to domestic programs, Social Security, and Medicare.  As you can imagine, I don't see this as much of a deal.

Liberals now have all the leverage- the Debt Ceiling deal that led to the SuperCommittee looks like a well- negotiated one for Democrats at this juncture.  If Congress does absolutely nothing, taxes go up in 2013 and the medium-term budget problems are practically solved.  And Democrats control the Senate and the Presidency.  They're holding four aces.

So naturally they'll fold.  Senator Kerry has been rumored to be considering the GOP deal in the SuperCommittee.  President Obama could still veto of course, but his history of compromise doesn't exactly fill me with confidence.

Don't get me wrong- like the Democrats, I am willing to accept big cuts to domestic programs as well as the military.  But I would accept those not because I believe we should cut, but because in politics one has to compromise and I realize that many don't share my values.  But Democrats seem to have confused compromising with caving in.  Democrats need to be firm in refusing to consider cuts that aren't accompanied by significant revenue increases- that's what compromise is.  Let's see if they can stick to it.