TPA to Congress: Go Big or Go Home

David Williams

November 14, 2011

During the next two weeks taxpayers will see some of the elements of the of the August debt ceiling agreement come together with a vote on a Balanced Budget Amendment (BBA) and the report from the Joint Select Committee on Deficit Reduction (aka the Super Committee).  In typical Washington fashion, there are two potential outcomes for both the BBA and the Super Committee.  A weak BBA and a discordant Super Committee could foreshadow a future filled with fake spending cuts and tax increases.

To some, the BBA is the Holy Grail of fiscal responsibility with Congress and the President being forced into fiscal discipline.  The logic behind a BBA is that every year Congress and the President have the ability to balance the budget, they just choose not to do so and that they have to be forced to accomplish that task.  There is one potentially dangerous pitfall and that is a weak BBA that does not have a spending cap or does not require a super majority to raise taxes will just be window dressing and do more damage than good.  This dilemma/discussion is heating up in the halls of Congress as the House of Representatives grappled with presenting H.J. Res 1 (let’s call it the “Strong BBA”) or H.J. Res 2 (let’s call it the “Weak BBA”).  The Weak BBA does not require spending caps or a supermajority to raise taxes.  In contrast, the Strong BBA is a true safeguard against balancing the budget on the backs of taxpayers.  A coalition letter signed by the Taxpayers Protection Alliance and sent to House Speaker John Boehner noted that, “Unless tax hikes are taken off the table, reckless lawmakers will increase taxes to pay for these new bloated spending levels, rather than bring spending in line with revenues. A ‘clean’ BBA provides the excuse big spenders seek to raise taxes and grow government.”  The republican leadership has decided to move forward with a vote on the Weak BBA in the next few days because of its chances of passing rather than being the right amendment.  According to the Washington Post, “An ‘overwhelming number’ of House Republicans last week ultimately settled on the Goodlatte version because they believe it ‘has the best chance of passing,’ the Virginia Republican’s office said Thursday.”  Once again, political expediency has won over fiscal responsibility.

The congressionally-mandated Super Committee is getting ready to release its report to reduce the deficit by more than $1 trillion.  The catch with the deficit reduction package is that it does no exclude tax increases as a way to achieve deficit reduction.  Comprised of six republicans and six democrats, one can only imagine the differing of opinions and disagreement on how to reduce the deficit.  And, as the clock ticks down to the Super Committee’s deadline of November 23*, reports coming out of the Super Committee have confirmed the fear of political bickering and the outlook not being very  good for agreement.  According to CNN on November 14, 2011, “They have been meeting for two months, poring over concepts and ideas already hashed out by three other groups over the past year.  But 10 days before their deadline, members of the so-called congressional ‘super committee’ created to forge a deficit reduction deal indicated Sunday that they remain hung up on basic issues of tax and entitlement reform that have previously stymied agreement.”

We all know that there will be some spending cuts. We also know that spending cuts in the past have been fleeting/fake (read previous blog post here).  There now seems to be a growing consensus that tax increases will also be on the table.  According to the Christian Science Monitor, “With just two weeks before a Nov. 23 deadline, Congress’s ‘super committee’ broke new ground this week, as Republicans – for the first time in 10 months – offered a plan that includes tax hikes.”  We don’t know what kind of tax hikes because of the secrecy of the talks but it is a sign that they are on the table.  One report from the Los Angeles Times indicates that the Super Committee may completely chicken out and defer and decisions until after the 2012 elections, “With time and compromise slipping out of reach, the congressional “super committee” may punt its toughest deficit decisions to next year rather than strike a deal that would enrage both parties’ political bases heading into the 2012 election.”  Any agreement by the Super Committee that doesn’t ensure real spending cuts and doesn’t take tax hikes off the table will only exacerbate the deficit and debt problems.

It has become increasingly clear that Congress is looking for the easy way out of the August debt ceiling agreement with a weak BBA being offered and a Super Committee looking at tax increase.  If real fiscal reform isn’t enacted, one can only imagine the political fallout for both republicans and democrats.

*It is unbelievable to think that the day before Thanksgiving is the proper time to release any report, especially one as important as the Super Committee.