Seriously? The federal deficit just reached $15 trillion and out great Congress can't figure how to slow spending over the next 10 years. Yes that's correct, the committee isn't even attempting to cut spending. It just wants to reduce the growth of spending. Possibly cut some stuff already planned to increase, but not actually decrease spending.
Without cutting back on spending, we're playing the dangerous game of relying heavily on growth to cut the annual deficit. Grow revenue faster than spending and the deficit begins to shrink. Naturally Democrats want that 1% to pay more taxes that would grow that revenue, but that isn't assured to work as it might just reduce growth.
Still, I'd probably be inclined to implement some tax increases on those making over $1M. They surely can afford to pay more. Shouldn't we figure out how to capture the extra money that Buffett assures us he'd be so happy to pay?
The really shocking news is that now the Super Fail is talking about something smaller than the already agreed upon cuts of $1.2T that will automatically start in 2013 unless another deal is reached.
What isn't clear is if the committee reaches a $600B or $700B deal what happens to the difference? Would assume that the balance would still kick in automatically. This failure is amazing because the voting public wants to see something substantive. On top of that, many analysts think something in the $3-4T range needs to brought to the table.
Remember $3T only amounts to $300M a year which is only around 20% of the current deficit.
The markets won't likely have much reaction unless a deal beyond say $2T is struck and that seems out of the realm of possibility. If anything the market reaction of late has already taken into account an expected failure of Congress. Not to mention, the market eyes have clearly been on Europe.
Honestly I don't expect anything this week. The deadline is midnight Wednesday. One would think these guys want to go on holiday break, but they sure seem to push everything to that last minute. Not to mention on top of this, voters will undoubtedly remember that these guys weren't able to solve the problems.
Why keep the gang of 12 in office? It appears clear they are unable to reduce spending so Congress apparently needs new blood that isn't tied into lobbyists or whatever it is that is keeping them from doing what is required.
Details from CNBC.com:
- Financial markets have low expectations for the panel. Some analysts are already looking beyond it toward the impending year-end expiration of economic stimulus measures. Those are seen as Washington's next test of fiscal responsibility.
- Automatic budget cuts, evenly split between domestic and military spending, are due to kick in in 2013 if the committee fails to reach a deal. But Congress could try to rework or undo the legislation mandating the cuts before then.
- "It still seems mind-boggling that they could break up without doing anything. So I still think they'll get something—not $1.2 trillion, perhaps a deal around $700 billion," said Potomac Research policy analyst Greg Valliere.
- Unlike earlier budget standoffs, a failure next week would threaten neither a government shutdown nor a debt default.
- The threat of automatic cuts has not been enough to jolt Republicans out of their opposition to new tax increases or Democrats out of their defense of spending for social programs such as Medicare, Medicaid and Social Security.
- House of Representatives Speaker John Boehner, the top Republican in Congress, on Friday floated an offer to try to break the logjam. His plan would save $643 billion over 10 years, about half the panel's goal, but the two sides could not even agree what was in the plan. (wow, $643B? Don't get too crazy Boehner...jeez)