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Wednesday, August 08, 2012

It's not the Budget Control Act of God

by digby

I just want to write a short note to answer those who are saying my insistence that the congress and the president don't need to honor the sequester agreement is wrong. If that weren't the case, what's this all about?
One year after Congress approved a controversial plan to extend the nation’s debt ceiling, Republicans are stepping up their campaign to repeal a major part of the law.
The congress made the law and they can unmake it. The "fiscal cliff" is a phony construct that grew out of the Grand Bargain debt ceiling negotiations last year. Recall that this is what was produced by that process, an abortion called The Budget Control Act:
Debt limit:

The debt limit was increased by $400 billion immediately.

The President could request a further increase of $500 billion, which is subject to a congressional motion of disapproval which the President may veto, in which case a two-thirds majority in Congress would be needed to override the veto. This has been called the 'McConnell mechanism' after the Senate Minority Leader Mitch McConnell, who first suggested it as part of another scheme.

The President could request a final increase of $1.2–1.5 trillion, subject to the same disapproval procedure. The exact amount depends on the amount of cuts in the "super committee" plan if it passes Congress, and whether a Balanced budget amendment has been passed.

Deficit reduction:

Spending was reduced more than the increase in the debt limit. No tax increases or other forms of increases in revenue above current law were included in the bill.

The bill directly specified $917 billion of cuts over 10 years in exchange the initial debt limit increase of $900 billion. This is the first installment ("tranche") of cuts. $21 billion of this will be applied in the FY2012 budget.

Additionally, the agreement established the Joint Select Committee on Deficit Reduction, sometimes called the "super committee", to produce deficit reduction legislation by November 23, 2011, that would be immune from amendments or filibuster (similar to the Base Realignment and Closure). The goal of the legislation was to cut at least $1.5 trillion over the coming 10 years and be passed by December 23, 2011.

Projected revenue from the committee's legislation could not exceed the revenue budgeting baseline produced by current law. (Current law has the Bush tax cuts expiring at the end of 2012.) The committee would have 12 members, 6 from each party.

The agreement also specified an incentive for Congress to act. If Congress failed to produce a deficit reduction bill with at least $1.2 trillion in cuts, then Congress could grant a $1.2 trillion increase in the debt ceiling but this would trigger across-the-board cuts ("sequestrations"[note 1]).These cuts would apply to mandatory and discretionary spending in the years 2013 to 2021 and be in an amount equal to the difference between $1.2 trillion and the amount of deficit reduction enacted from the joint committee. There would be some exemptions: reductions would apply to Medicare providers, but not to Social Security, Medicaid, Medicare beneficiaries, civil and military employee pay, or veterans.

As originally envisioned, these caps would equally affect security and non-security programs. Security programs would include the U.S. Department of Defense, U.S. Department of Homeland Security, U.S. Department of Veterans Affairs, the National Nuclear Security Administration, some management functions of the intelligence community and international affairs from the U.S. State Department. However, because the Joint Select Committee did not report any legistration to Congress, the act reset these caps to defense (essentially the DOD) and non-defense categories.
This is why we have Simpson and Bowles and David Walker and Alice Rivlin and every other fiscal scold in the country is running all over Capitol Hill rending their garments that the congress simply must repeal this horrible "sequester" ---
and replace it with a more "balanced approach." Like Simpson-Bowles.

The con is this: they are all acting as if the deficit targets are carved in stone and cannot be changed only the way to get there. And the Democrats are right there selling the same snake oil. Their only deal breaker is some kind of revenue in exchange for cuts, which some of the the Republicans seem to have finally begun to see is the deal of a lifetime.

After all, we already know that the desire to repeal the defense cuts is thoroughly bipartisan. Leon Panetta already gave that game away. They are being used as a negotiating tool to get recalcitrant Republicans on board with some kind of "revenue" that the Democrats can call a "win" in exchange for Simpson-Bowles level cuts. (The Tea Party faction is not inclined to give Democrats even a phony "win" but that calculation may very well be different in the lame duck.)

Regardless of whether or not its politically feasible to repeal this whole mess and start over doesn't change the fact that it's not the Budget Control Act of God, it's just another law and it can be changed if there is political will to do it. Not that I have any faith that there is, mind you. I'm just saying that it's theoretically possible.

Update: And, by the way, I was wrong to indict AARP as being part of the Peterson Catfood Bus Tour the other day. Their former CEO is on it, but the organization is doing its own bus tour, which you can read about here.