Statement: Robert Greenstein, President, on New Debt Ceiling Agreement — Center on Budget and Policy Priorities
To be sure, the joint committee will have the legal authority to produce a balanced package that includes revenue increases as well as program cuts. But House Speaker John Boehner, in an effort to secure votes for the deal, is undermining the joint committee before it’s even established. Boehner has circulated documents to his caucus claiming the agreement requires the use of a “current-law revenue baseline,” thus “making it impossible for Joint Committee to increase taxes.” That’s flatly not true, as my colleague Jim Horney has ably explained; the agreement does not require the joint committee to use any particular baseline, and the joint committee is free to adopt revenue-raising measures if it so chooses.
But the fact that one party is being led to believe that the deal does bar the joint committee from raising tax revenue is not helpful, to say the least. And coupled with Speaker Boehner’s pledge not to name any members to it who will raise any tax revenue at all and to defeat any joint committee-produced package on the House floor if it raises any revenue, this seems to give the joint committee only three places to go — severe cuts in entitlement programs, deep cuts in entitlements coupled with even deeper cuts in discretionary programs (i.e., cuts on top of the at-least $1.1 trillion in discretionary cuts that the annual caps will produce), or a failure to meet its target.
If the joint committee were only to cut entitlement programs to reach its target, how deep would those cuts be? The deal that President Obama and Speaker Boehner were negotiating several weeks ago would have raised Medicare’s eligibility age, raised Medicare cost-sharing charges, shifted significant Medicaid costs to states, modified cost-of-living adjustments in Social Security and other benefit programs (and in the tax code), and instituted other entitlement savings. Those steps would have saved $650 billion to $700 billion over ten years. The joint committee would have to produce cuts twice as deep — and roughly twice as deep as those in the Gang of Six plan.
Democrats on the joint committee would not conceivably agree to entitlement cuts, or a mixture of entitlement and deeper discretionary cuts, that deep. Hence, if Speaker Boehner honors his pledge to keep revenue increases off the table, the committee will surely fail — and gridlock and policy warfare will continue.
The joint committee could agree on a much smaller amount of savings without revenues, but nothing close to $1.2 trillion to $1.5 trillion. Thus, unless Republicans back off their refusal to consider any increase in revenues, the joint committee will fail to produce savings anywhere close to $1.2 trillion — triggering across-the-board cuts that are of unprecedented depth and will remain in place for nine years.
In key respects, then, this deal postpones the biggest battle over deficit reduction, creating an even more cataclysmic clash that would occur most likely in a lame-duck congressional session after the 2012 election. At that point, three huge events will loom: 1) across-the-board cuts in January 2013, with half of them coming from defense (amidst likely charges that they will jeopardize national security); 2) the scheduled expiration of President Bush’s tax cuts at the end of 2012; and 3) the renewed specter of default if policymakers do not raise the debt ceiling quickly again by early 2013. Where all of that will lead policy debates and outcomes is impossible to predict at this point.