The Good, the Bad, and the Ugly
August 1, 2011
Congress is preparing to vote on a new deal to raise the debt ceiling. The deal was negotiated over the weekend after intense negotiations between the White House and the leaders of the House and Senate. The deal would raise the debt ceiling by $2.4 trillion (which would be enough to last through the 2012 elections) and require immediate spending cuts. The first round of cuts would total $1 trillion over ten years. The second tranche would involve a “super committee” of 12 members of Congress and involve an additional $1.2 trillion to $1.5 trillion. The weakest part of the deal is that there is no requirement that a Balanced Budget Amendment (BBA) be passed. The Taxpayers Protection Alliance (TPA) does not believe there are enough provisions to protect the taxpayer and urges the House and Senate to vote “NO” on the deal.
The Good – Probably the best news to come out of this deal is that tax increases have been taken off the table for the first round in that the first round of deficit reduction would only be spending cuts. We don’t know what those spending cuts are, but we do know that there will not be any tax increases (yet). Additional good news is that if members of Congress can’t agree on a second round of cuts, there would be across-the-board cuts including Medicare and Defense spending. There needs to be shared sacrifice with any spending cuts.
The Bad – There is no requirement for a BBA to be passed. A key provision in the Cut, Cap, and Balance coalition (a coalition that TPA has been active), a strong BBA is imperative to force fiscal discipline. Current and former members of Congress and Presidents have had the opportunity to balance the budget; they have simply chosen not to do so.
The Ugly – The strangest thing about this deal is the “super committee.” According to The Hill, “The deal would set up a select 12-member bicameral committee to put together another $1.5 trillion deficit-reduction package that must be reported to Congress by Thanksgiving and which Congress must approve by Christmas. Committee deadlock or congressional failure to act on the recommendations would trigger $1.2 trillion, across-the-board spending cuts divided evenly between defense and non-defense spending.” Unfortunately, this does not preclude tax increase as a way to reduce the deficit.
There are quite a few unknowns in the deal but what is certain is that the spending cuts don’t go far enough, there is no requirement for a balanced budget and tax increases still loom on the horizon. This is a bad deal for taxpayers and should be voted down.