Another Deficit Standoff This Year? Maybe Not

August 30, 2011

The Wall Street Journal

Gerald F. Seib

We now have it from no less an authority than the chairman of the Federal Reserve: Washington's dysfunction isn't merely embarrassing. It's actually harming the American economy.

Ben Bernanke, in a high-profile speech Friday, looked back at this summer's chaotic negotiations over a deficit-cutting deal and concluded that a repeat of that mess could "seriously jeopardize" the willingness of the world to park money in the U.S.

Ah, but life is full of second chances, and this fall Washington gets one. That deficit-cutting deal struck in August created a congressional supercommittee and ordered it to come up with a second round of deficit cuts by late November. If you want to be an optimist—and are willing to risk sounding naïve—there actually are reasons to think this effort can work better than the summer's follies.

To recap: The deficit-cutting bill Congress finally passed laid out $900 billion in spending cuts over the next decade, and then handed the goal of finding $1.5 trillion in additional deficit cuts to a new committee composed of 12 members of Congress, divided evenly between the House and the Senate and the two parties.

This group has to identify at least $1.2 trillion in deficit reductions—not the full $1.5 trillion goal—by Nov. 23, and Congress has to actually pass them in a straight up-or-down vote by Dec. 23, or a set of $1.2 trillion in automatic spending cuts would kick in.

On its face, this supercommittee wouldn't seem to have a much better chance at comity and compromise than any of the various messy efforts to arrive at the original deal, which narrowly averted a government default. The committee's partisan and ideological divides are quite stark.

Moreover, there are virtually no new ideas that haven't been tried on for size in recent months and discarded by one party or the other. The partisan fight over whether to include "revenues" as well as spending cuts in a deficit-cutting plan persists unabated.

Look deeper, though, and the supercommittee seems reasonably well-positioned to come up with a sane consensus without a repeat of the summer's destabilizing brinksmanship. For starters, its members, while an ideological mishmash, all are close to Congress's top leaders. Some are members of the Republican and Democratic leadership teams.

That means that, unlike the so-called Gang of Six senators who set off on a freelance deficit-cutting exercise earlier this year, this committee starts with the blessing of Congress's leaders, who hold a direct and personal stake in a successful outcome. Congressional aides predict plenty of back-channel communication between the committee and congressional leaders along the way.

Some of the panel's ideologically disparate members have shown they actually know the art of the deal. Ohio Republican Sen. Rob Portman, for example, is a trusted conservative, but one who learned how to get a budget through a divided Congress while he was running the White House budget office five years ago. Rep. James Clyburn of South Carolina had a 95% rating from the liberal Americans for Democratic Action last year, but Republicans in a budget group Vice President Joe Biden led earlier this year gave Mr. Clyburn high marks for seeking spending-cut compromises.

And crucially, members from both sides suggest they're open to creative ways—starting with curtailing business and personal tax credits and closing big tax loopholes—to bridge the divide over "revenues."

Beyond that, congressional leaders built the committee with rules designed to pave the way to passage. The committee can pass a plan with merely a simple majority, meaning that a single member of either party tipping to the other side can be enough to close a deal. That creates incentives on both sides to find a broader consensus.

Once the committee has a plan, the rules say it also can pass the Senate with a simple majority. There's no need for the usual 60 votes to block a filibuster, which has been the principal impediment to action in recent years. This one will be filibuster-proof.

Perhaps most important, the committee, like all of Congress, is operating under serious pressure. All those involved in the summer deficit wrangling—Republicans, Democrats, Congress, President Barack Obama, the tea party—fell in public regard as a result. In the wake of the debt deal, Gallup polling found Mr. Obama's approval rating fell to the lowest point of his term, while approval ratings for Congress and the tea party hit all-time lows. The political need to show Washington is capable of governing is acute.

On a more practical level, if the committee doesn't do a deal, or if Congress doesn't approve a deal, automatic spending cuts, including deep ones in defense, kick in automatically. Those automatic cuts are called a "trigger," and appropriately: They are the equivalent of Congress's holding a gun to its own head and pulling the trigger upon failure.

A guarantee of consensus or comity? Hardly. But at least this time the playing field is tilted slightly toward success rather than failure.

<- Go Back