No Supercommittee Deal is the Best Deal
Nearly all of the deficit reduction goal can be achieved by closing down offshore corporate tax havens and making the richest companies pay their fair share
George E. Curry NNPA Columnist
November 21, 2011Although automatic cuts in defense spending and domestic programs are scheduled to go into effect as a result of the congressional supercommittee’s failure to reach a budget deal by Wednesday, those reductions are far better than what Republicans on the committee were proposing and Democrats were willing to accept.
According to the Congressional Budget Committee, defense spending will be slashed automatically by 10 percent in January 2013 while domestic programs will be reduced by 7.8 percent. Additionally, Medicare spending will be lowered by 2 percent. Exempted from the automatic cuts are Social Security, veteran benefits, Medicaid and certain low-income programs.
“No deficit deal is better than a bad deal, and a bad deal may be the only kind this committee can reach,” Orson Aguilar, executive director of the Greenlining Institute, said as it became clear the committee of six Democrats and six Republicans would not come to an agreement. “As we reported this summer in our study, ‘Corporate America Untaxed,’ nearly all of the deficit reduction goal can be achieved by closing down offshore corporate tax havens and making the richest companies pay their fair share. There is no need to devastate vital programs for the elderly and other vulnerable Americans.”
The goal of the supercommittee, formally known as the Joint Select Committee on Deficit Reduction, was to reduce the budget by $1.2 trillion over the next 10 years. As an incentive to complete a deal, an automatic trigger was set to go into effect if the committee failed to reach that goal, slashing an equal amount from military and domestic spending. Under the most progressive GOP proposal, if it can be called that, Sen. Patrick J. Toomey (R-Pa.) offered $300 billion in new taxes, a far cry from an equal split between spending reductions and new tax revenue favored by Democrats.
What is more disturbing is that Democrats on the committee were willing to make concessions that would hurt their core constituents. They offered a proposal to reduce deficits by $3 trillion over 10 years that included $500 billion of savings in health care programs, higher Medicare premiums, and a new form of indexing inflation that would reduce cost-of-living adjustments for Social Security beneficiaries.
The compromise deficit proposals were to the right of the Simpson-Bowles plan of last year, with minimal revenues and as much as $600 billion in cuts to Medicare and Medicaid, the Greenlining Institute noted.
Greenlining, a multi-ethnic public policy and advocacy group, wrote to the committee in August stating that simply closing offshore tax havens could reduce the deficit by as much as $1 trillion. One of its studies showed that by using offshore tax havens, major companies such as Exxon and General Electric pay far less of their income in taxes than the average American, and in some cases no taxes at all.
Unlike Democrats, Republicans have been steadfast in supporting their base, which includes the wealthy and major corporations.
According to Citizens for Tax Justice, 52.5 percent of the Bush tax cuts go to the richest 5 percent of taxpayers. The Treasury Department reports that extending the Bush tax cuts to the top 2 percent of taxpayers will cost $678 billion over the next decade.
GOP leaders refuse to consider letting the Bush tax cuts expire. In a concession to Republicans last year, President Obama broke a campaign pledge by agreeing to extend the tax cuts beyond their original expiration date. He made that agreement in exchange for Republicans extending unemployment benefits and the payroll tax cuts.
There is broad public support for requiring the wealthy to shoulder a fairer share of the tax burden.
In an October Washington Post-ABC News poll, three-quarters of Americans backed a tax hike on millionaires. A Washington Post-Bloomberg News poll that same month found that more than two-thirds supported raising taxes on households earning at least $250,000.
The committee seemed doomed from inception, evenly divided with no member willing to break party ranks. The supercommittee’s inability to reach a deal marks the third high-profile budget failure over the past 12 months, following a bipartisan deficit commission and unsuccessful talks last summer between President Obama and House Speaker John Boehner.
The decision to invoke automatic spending cuts as part of raising the national debt limit in August was intended to pressure Congress into making tough budget cuts. But now that it didn’t happen both Republicans and Democrats are looking into ways to come up with another gimmick that will again postpone making tough decisions.
Republicans conveniently ignore that fact that the deficit problem was caused by a combination of two George W. Bush wars, a poor economy and two Bush tax cuts. When Bush assumed office, he had a $128 billion surplus. Bush, on the other, ran up deficits every year he was in office.
When Obama assumed office, the deficit was more than $11 trillion. An additional $4 trillion was added under Obama, some stemming from Bush’s 2009 budget. Overall, approximately 75 percent of the deficit was incurred while Bush was in office. Where were the Republican voices then?
Politicians being politicians, look for some more political shenanigans that will do everything except seriously tackle our fiscal problems.
George E. Curry, former editor-in-chief of Emerge magazine and the NNPA News Service.