Tuesday, November 01, 2011

America will benefit if the Supercommittee deadlocks and November 23 passes

Unable to reach agreement on what to cut and by how much, the American governmental Troika (the House, the Senate and the President) struck a Supercommittee consisting of 12 members of Congress (half from each party).
The Supercommittee's mandate is to agree on where cuts totalling $1.5 trillion over the next 10 years are to be made, and then Congress will vote up or down (which means no amendments and therefore no cherrypicking) on the whole package. 

If the package is not agreed upon, then automatic cuts across the board are made, including cuts to both social programs and defence.

Right now the Supercommittee is a puppet, controlled by its masters in the House and Senate. The Republicans refuse to consider revenue increases in the form of taxes, while insisting on deeper cuts to social security and other social programs. The tail wagging the Republicans is the group – Tea Party and others – who have signed a pact not to increase taxes.

If the Democrats agree to social cuts without tax increases, many will pay a price in the 2012 and subsequent elections, including the President.

I believe it is best for America that the Supercommittee not reach agreement (if there are not substantial revenue increases in the package), and that the automatic cuts then take place.

However, given that both Republicans and Democrats are not keen to cut defence spending (many have large bases in their states), the chances are very high that both the Senate, the House and the President will agree to postpone the automatic cut date. The battle will be over the date it will be extended to: the President might prefer a shorter date while the Republicans might prefer a longer one, past the November 2012 elections.

No matter what date the automatic cuts are postponed to, the Troika will have to address the issues they punted to the Supercommittee: what gets cut and by how much.

The automatic cut provision will be shown to be the toothless tiger it always was (it was agreed upon because the Republican leaders did not want to have the country's funding shut down, but could not control their Tea Party members).

It is time for Americans to face reality, and to consider how much expenditure should be cut, when it should be cut, and how much the deficits should be reduced by increasing revenues (read: more taxes).

In this discussion, the Democrats are better situated to win more seats in the House by sticking to their guns than the Republicans are.  In any case, the delay will force the bulk of the Republicans to address the Tea Party demands, and face them  down.

That is necessary for the injection of some sense and sensibility into the nonsensical American discussions  that have been taking place for several years now.

And while attentions shifts to an area that President Bill Clinton is an expert in (what are the meaning of words? When is a cut not a cut? If it is the closing of 'loopholes' rather than an increase in tax rates?), perhaps the Democrats and Obama might also have a few talks with Stiglitz.
Spending on infrastructure and green economy items means jobs at home. Good jobs with good pay. Jobs that cannot be undercut or taken away by business owners or Chinese imports.

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