The 12 members of the congressional supercommittee aren’t isolated and alone, working like monks, as they pursue at least a $1.2 trillion deficit reduction plan. The six Republicans met at least twice last week with House speaker John Boehner and Senate minority leader Mitch McConnell. The week before, three Democrats and three Republicans had dinner at Hunan Dynasty on Capitol Hill, prompting fears among their absent colleagues that a secret deal was being concocted.
The official deadline for the supercommittee is November 23. To meet it, agreement would have to be reached 10 days earlier to give the Congressional Budget Office time to score the plan and the House and Senate 48 hours before voting on it, with no amendments or filibusters allowed.
There appear to be two possible outlines of a plan taking shape, one good, one terrible. To attract the GOP Six, the good plan would be built around tax reform, with either income or corporate tax rates (or both) reduced or frozen, while corporate welfare was scraped from the tax code—loopholes, breaks, and special writeoffs, possibly including those Obama has denounced for corporate jet owners and oil companies. Would any Democrats go along? Senators Max Baucus and John Kerry, maybe. And if Senate majority leader Harry Reid blessed the deal, Patty Murray, his surrogate on the panel, probably would. This is Deal A.
Deal B is what might happen should Deal A fall by the wayside. More conventional, it would consist of some formula of tax hikes and spending cuts. Democrats want “balance,” a 50-50 split. Conservatives are worried three Republicans on the supercommittee—House members Dave Camp and Fred Upton and Senator Rob Portman—might accept Deal B as a last resort. Not likely, unless Boehner and McConnell anointed the deal.
The biggest impediment to either deal is President Obama. Deal A clashes with his tax-the-rich, anti-Republican strategy, the centerpiece of his reelection campaign. Obama wants the Bush tax cuts to expire at the end of 2012 and a 5.6 percent surtax to be added for millionaires. The top rate would rise from 35 percent to 45 percent.
Republicans believe Obama has become far less receptive to a deal since he went on his offensive post-Labor Day. An essential part of it is his indictment of congressional Republicans as obstructionists, a do-nothing Congress. Reaching agreement with tax-phobic Republicans on the biggest issues of the day—deficits, spending, taxes—would all but nullify his strategy.
Supercommittee Republicans think their Democratic counterparts are following Obama’s lead, for the moment anyway. Their desire for a deal has flagged too.
With no agreement in sight, the way is clear for the Big Three to step in with a plan of their own, privately or publicly. That’s Reid, McConnell, and Boehner. They don’t agree on much, but all three are eager for a deal. The supercommittee was Reid’s idea in the first place, so he has a vested interest in its success.
Also, Reid may understand a bipartisan deal would help Democrats running in 2012 and might preserve a Democratic majority in the Senate with Reid at the helm. It’s questionable whether Reid would buck Obama. But a Democratic Senate might be a higher priority for him than keeping Obama in the White House.
For Republicans, Deal A is not only the preferred option but the only viable option. It’s the only plan that creates Republican unity on the supercommittee. And it’s the pro-growth option. As such, it ought to appeal to most Democrats and Obama, but won’t. One Republican insists it can fairly be described as cutting taxes, even if rates aren’t lowered. How so? By allowing the Bush tax cuts to become permanent rather than be phased out automatically next year, thus raising income tax rates.
Some conservatives would balk at Deal A, arguing its elimination of loopholes and breaks would be tax increases. Haven’t Republicans promised not to approve tax increases? Yes, but there’s a distinction worth noting here. Republicans wouldn’t be agreeing to tax rate increases. Rate increases are economically harmful. Getting rid of loopholes and special breaks usually isn’t.
There’s another factor in considering Deal A. It would deprive Camp, chairman of the House Ways and Means Committee, and Baucus, chairman of the Senate Finance Committee, of the opportunity to take up tax reform themselves, with all the fanfare of hearings, markups, and closely watched negotiations. They might balk at surrendering their role in tax reform to the supercommittee.
The next best outcome to Deal A is zilch—no agreement. This means Republicans offer some version of Deal A to Democrats, who reflexively reject it. Republicans would argue they’d sought a bipartisan deal and the Democrats were at fault for spurning it.
There’s a wrinkle. No deal would trigger a sequester, forcing automatic spending cuts, half from defense, half from domestic programs. Would Congress really let these cuts go into effect? Certainly pro-defense Republicans would try to undo the military cuts. And liberal Democrats would seek to limit domestic cuts.
The worst option is almost any configuration of Deal B. It would cause an angry division among Republicans. And it would put them on Obama’s side as we head into a presidential election year. Its tax increases would presumably include rate hikes, and it would be economically counter-productive, a double whammy.
There’s bound to be a negative reaction to no deal, whether or not mandatory cuts occur. The credit rating of U.S. debt might be further downgraded. Obama, Democrats, and the media would blame Republicans. That’s business as usual, and it leaves the debt mess unresolved.
Fred Barnes is executive editor of The Weekly Standard.