Debt

Would It Be Better to Pull the Debt-Deal Trigger?

|

The debt-limit deal triggers automatic cuts if a congressional committee doesn't come through. Would it be better to just pull the trigger?

The other super committee.

Here's the background: The debt deal created a bipartisan "super committee" tasked with coming up with a plan to cut a minimum of $1.2 trillion from the federal deficit over the next decade. Knowing full well that the committee process frequently fails, especially when it comes to tough cuts, the deal also put in place a backup mechanism—a deficit "trigger": If the committee doesn't agree on a big enough deficit reduction package, or if the rest of Congress doesn't vote to enact that package, then an equally large array of automatic reductions in planned spending go into place.

The automatic deficit reductions would hit the defense budget the hardest—about half the total amount would come out of the Pentagon's projected spending. Social Security and Medicaid would be left untouched, but Medicare providers would see payment reductions as part of the triggered cuts.

It wouldn't even come close to the spending cuts necessary to make the basic long-term deficit math worth. But it might still be better than whatever the committee comes actually up with.

In large part, that's because we don't know what the committee will actually recommend. It might, for example, include deficit reduction ideas that designed to allow Congress to get out of them years down the road. It might even include additional spending on longer unemployment benefits and an infrastructure bank. According to The Wall Street Journal, the Obama administration looks ready to push for additional stimulus spending in the committee's deficit package:

The White House is looking for ways to boost the sluggish economy and bring down unemployment that is now stuck above 9%. Mr. Obama, facing re-election next year, has been pushing Congress for months to adopt a variety of stimulus measures, some of which he could urge the committee to embrace. These include extending unemployment-insurance benefits and a payroll-tax cut for employees, which expire at year end and together cost more than $160 billion a year, and an infrastructure bank that could cost as much as $30 billion. The White House is also looking at a payroll-tax cut for employers, worth perhaps as much as roughly $110 billion, and other tax breaks for businesses of as much as $55 billion.

Mr. Obama's recommendations could complicate the committee's task because the stimulus measures, by increasing government spending and reducing revenue, would worsen the deficit in the short term.

Now, it's not likely that additional stimulus spending would get past the committee: The Americans for Tax Reform pledge not to increase revenues doesn't outlaw additional spending, but it would mean that the spending would have to be offset by further cuts. And finding cuts that the committee's Republican and Democratic members can both agree on will be tough enough as it is. 

It's also true, of course, that the triggered deficit reduction wouldn't be a sure thing either. As the Manhattan Institute's Josh Barro told The New York Times:

"The trigger can get pulled," said Josh Barro, a senior fellow and federal fiscal expert at the Manhattan Institute, a conservative research organization. "But then there is a substantial amount of time to unpull the trigger. When you look at the committee picks, it is really hard-core partisan people who are not likely to compromise, and some would prefer the trigger rather than the fight over the campaign season to come up with a plan."

And even if the trigger was pulled, the Pentagon reductions would be easy to undo in later years through supplemental defense spending bills.

Obviously the ideal thing here would be fore the committee to come up with a big plan that overhauls the entitlement system and then sails through Congress on a wave of bipartisan support. But since Obama himself has declared that Medicare requires only "moderate adjustments" and Democratic leaders in Congress have taken substantive entitlement reform off the table entirely, that seems less than likely. Which may mean that the triggered deficit reduction, which offers at best a tiny step forward on medium-term deficit reduction, is the best bet for any real deficit reduction out of this deal.

NEXT: Bob Bowdon: What's Next for School Choice - and New Media

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  1. A bunch of clowns with their underwear on the outside- and that’s just the congressmen.

  2. Or – and just bear with me here – we could keep entitlements, keep spending, and pay for it by having the Fed buy treasuries endlessly, and DARE our creditors to do something about it, since we know they probably won’t!

    There you have it; I’m now qualified to be either a democratic or republican politician.

    1. Shit, why don’t we just Rome it up and start sacking and enslaving neighboring countries? It worked pretty well for them.

      1. Sounds good to me.

      2. I’m waiting for the “empire is actually good” memes to start circulating in TEAM RED and TEAM BLUE soon. I’m half serious; I would not be surprised to see some people in either TEAM say “well, let’s take their oil because we saved them” or the like; in fact, I think a few fringe people already have.

        1. ** eyes Canadian oil fields, drools **

          1. We aren’t getting out of this without stoping entitlement spending or forcibly acquiring assets.

        2. “Empire” I can understand; “nation-building” not so much.

        3. Wasn’t that shit going around during the Iraq invasion?

          1. “Nuke their ass and take the gas”

          2. Yes, I have been saying stuff like this for years. But I say we should keep ourselves to the Western Hemisphere (at least to start with).

            1. Or we could be like China and just go over there and pay them a fair price for all their stuff. Instead we send the World Bank down there to slowly rob them.

              1. I’m just as happy with selling statehood to other entities in the Americas as I am with annexing them.

        4. It will happen if we retain massive military superiority and continue down the path to economic failure.

  3. Unpull a trigger? Jesus H. Christ, only in fucking Washington DC can you unpull a trigger.

  4. Would It Be Better to Pull the Debt-Deal Trigger?

    This is how reality will spell the end of the debt ceiling debate:

    D-E-F-A-U-L-T

    Congress is UNWILLING to reign in spending; Americans are unwilling to let go of their precious political bribes [what we call with a sick sense of humor “entitlements”]; and the Fed will continue to inflate until FNRs cover the oceans. So the situation will continue to spiral down until the suckers stop accepting dollars and pensioners are unable to buy anything with them. Or DEFAULT, to put it more succinctly.

    Gold, Guns and Gin.

    1. Well, I have the first two, but I don’t know how to brew moonshine.

  5. And remember – the Tea Baggers are the crazy terrorists.

  6. What’s more (or less) likely:
    A balanced budget or Aquaman becoming cool?

    1. Both are impossible.

      1. You say that, but what if you could have aqua powers in this world? Meaning with no one else having superpowers?

        1. Still worthless. Fucking hate the ocean.

  7. we don’t know what the committee will actually recommend

    Food stamps.

    1. 1.84 Multiplier!

      1. Yeah, Vilsak ignores the possibility that people might have spent that extra $0.84 anyway without their Stamps.

  8. I just want to go on record that I have absolutely zero confidence in the debt trigger actually working as advertised. The bozos in that Virginia swamp will not let it get pulled. They can’t. It’s not in their DNA.

    1. It’s a Maryland swamp. My state got our half back before the War of Northern Aggression. DC is north of the Potomac.

      1. My apologies, I went to a public school. Hmm, yep, the land was annexed from Maryland, so that makes it a Maryland swamp.

  9. Look, we have $120 trillion in unfunded liabilities. We are much more broke than GM ever was. Our choices are {stop spending, take over Canada, inflation}… As for scary default… It happens all the time, and investors deal with it.

    1. Yeah, investors, deal with it!

      1. Anyone know how often the PIGs defaulted in the 20 years prior to the Eurozone?

  10. I can practically guarantee that the committee will come up with nothing coherent, and the automatic reductions will come into effect. This is because the Democrats would rather see the throttle eased back military spending, so they’ll stonewall. Plus, the GOP picks are a bunch of namby pamby bitches.

    1. I agree they’ll come up with nothing coherent, and there will be talk about the automatic reductions coming into effect. It absolutely will not happen. Never forget, Democrats come from states that benefit from the military and military contracts, also.

  11. If the committee doesn’t agree on a big enough deficit reduction package, or if the rest of Congress doesn’t vote to enact that package, then an equally large array of automatic reductions in planned spending go into place

    If the committee can’t come up with a deficit reduction plan, who comes up with the dead-man’s-switch items to be cut when the debt deal fails?

    1. I thought those had already been specifically determined in the bill that passed a couple weeks ago.

  12. In corporate lingo, if the the company spends the money right before default when they know they are going to default, that is Fraudlent Conveyance… Go to jail. If Timmy lets Obama spend the money on his pals, then what?

    1. Obama gets re-elected?

  13. You know what would be awesome?

    If the “Super Committee” resigned en masse.

  14. Offhand, I think all the trigger cuts should be made anyway.

    So our military is forced to downsize and reduce its overseas commitments. OK by me.

    So Medicare is forced into the inevitable crisis sooner rather than later. OK by me, and I work for a hospital.

    So agencies have to make some “deep” cuts – fine.

    So the economy can’t evade the inevitable deleveraging anymore – good. The more we put it off, the worse it will be.

    Are the trigger cuts the first $1.2TT than should be cut? I’m sure not. But they are definitely part of the many, many trillions that need to be cut.

  15. if we arrange the deck chairs towards the stern, they would slightly slow the process of tipping over before the titanic goes down.

Please to post comments

Comments are closed.