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?

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.