I Agree....No Deal is Better Than a Bad Deal... This Supercommittee was Doomed From the Start!

James C. Capretta November 18, 2011 4:00 A.M.

Supercommittee, Super Confusion
The GOP is in danger of losing its way on the budget and taxes — again.

As the November 23 deadline looms for the Joint Select Committee on Deficit Reduction — the “supercommittee” — to approve a deficit-cutting proposal or disband, the GOP again seems to be running the substantial risk of stealing defeat from the jaws of victory.

Recall that in the early part of the summer, House Speaker John Boehner was in the thick of negotiations with President Obama over the parameters of a “grand bargain” on the budget. The deal that was then under discussion would have required the GOP to agree to an $800 billion tax increase in return for Democratic support for entitlement reform.

If consummated, this deal would have been a political and substantive debacle for the GOP, as it would have ended their two-decade record of holding the line on tax increases, and it would not have secured anything of real value from the Democrats. Yes, under the terms of the suggested bargain, Democrats would have had to sign up for certain cuts in entitlement programs — but those cuts came more from the Democrats’ playbook than from the GOP’s. Among other things, Obamacare would have gone completely unscathed, and the cuts to Medicare and Medicaid would have come largely from more government micromanagement of the programs, not from market-based reforms. In short, the GOP would have abandoned its main source of electoral support — an unwavering commitment not to raise the federal tax burden — in return for affirmation of the Democratic welfare state. Some deal.

Fortunately, the speaker and the wider congressional GOP came to their senses before the Boehner-Obama talks ever reached the point of a deal. The bargain that was eventually struck to raise the debt limit in early August was far superior to what had been floated earlier in the summer, as it included no new taxes and placed enforceable caps on discretionary spending. Most observers concluded that the congressional GOP got the better of the president in the debt-ceiling fight.

Unfortunately, as the supercommittee heads toward its endgame, the same impulse that almost led to a disastrous Boehner-Obama deal in July now could lead some GOP members, on and off the supercommittee, to sign on to an equally ill-advised “bargain” with the Democrats. Recent news stories have suggested that the GOP members have offered to raise taxes by $300 billion over the coming decade as part of a deal that would also include some reductions in entitlement spending. But once again, the entitlement changes will do nothing to change the basic, cost-inflating structures of Medicare, Medicaid, or Obamacare. Indeed, if the GOP were to strike such a deal, it would make it that much harder to do what really needs to be done, which is to replace the entire health-entitlement status quo with reformed programs that rely on cost-conscious consumers in a functioning marketplace.

Moreover, the deal that is apparently under consideration would also rely on Senate Finance Committee chairman Max Baucus to write the actual tax and entitlement legislation, along with his GOP counterpart in the House, Dave Camp. This is hardly a process that builds confidence, as Baucus was a primary architect of the massive government overreach that is Obamacare. Indeed, if the supercommittee’s contribution to deficit cutting is to cede power back to the regular committee process, one has to wonder, what was the point of having the committee at all?

The problems for the GOP began as soon as the supercommittee was announced as a component of the August debt-limit deal. It was quite predictable based on the structure of the committee that the president and his allies in Congress would never let a proposal emerge if it didn’t include a tax increase that would violate the GOP’s core commitment to voters. That being the case, GOP leaders should have signaled in unmistakable terms that they would far prefer no deal to a tax increase. Instead, what we have gotten is a steady stream of statements from both House speaker Boehner and Senate minority leader Mitch McConnell that the supercommittee’s failure is not an option, thus raising the stakes and driving the GOP right into the dead end they now find themselves facing.

Some in the GOP may argue that a deal is necessary to avoid a rating-agency downgrade and the “sequester” process — which will automatically occur if no deal is reached, slashing funding across the board, including defense spending. But that’s not true. The supercommittee will make no difference to the ratings agencies, because it will make no difference to the final amount of deficit reduction — if it succeeds, it will merely replace the sequester process with the agreed-upon spending cuts and tax hikes. There is virtually no chance that the supercommittee will go beyond the required deficit reduction. And even if the supercommittee fails, a sequester is not guaranteed. There will still be a year before any cuts are implemented, leaving plenty of time for the normal legislative process to work toward an alternative series of cuts to substitute for blunt defense-spending reductions. In other words, the demise of the supercommittee would be far from the end of the story.

The supercommittee process was never a good idea, as it left the GOP vulnerable to Democratic hostage taking. Nothing would please the president more than to see his adversaries capitulate on their no-tax-hike pledges. The problem is compounded by some GOP members on and off the supercommittee who seem eager for a deal because it might enhance their own personal stature as power brokers.

It’s been clear for two years now that the kind of fundamental fiscal reform necessary to put the nation on a strong foundation for growth will not be possible with the current president. Cutting a bad budget deal now will only make it more difficult to do what is necessary if and when the opportunity for real reform presents itself in 2013.

— James C. Capretta is a fellow at the Ethics and Public Policy Center. He was an associate director at the Office of Management and Budget from 2001 to 2004.