Much hay has been made over the last couple of days about the failure of the so-called Supercommittee to hash out a budget deal that would reduce the long-term US deficit by $1.2 trillion —that’s $1,200,000,000,000, just for reference’s sake—over a ten year period. And there surely should have been: faced with long-term problems, Congress did what it is best at—it fiddled as Rome, if not exactly burned, at least lit the kindling.
And I don’t care in the least, for several reasons.
- It turns out that if Congress does nothing—and I mean NOTHING—and just lets the Bush tax cuts expire, and fails to adjust the earned income tax credit (which is a bad idea), and fails to adjust Medicare payments to make doctors and insurers happy—TRILLIONS of dollars will come out of the long-term deficit all on its own. Indeed, it will go down MORE than if the Supercommittee had worked.
- It isn’t at all clear to me how, with interest rates on US Treasury bonds at 2% or lower, and unemployment at 9+ percent, cutting federal spending is a good idea. Indeed, at the rate the US is refinancing its old debt at new rates, interest payments on the US debt are actually going DOWN right now. It makes a hell of a lot more sense to borrow money when interest rates are low than it would be to wait until rates were higher.
- THERE IS NO DEBT CRISIS. Seriously. While we certainly have long-term debt problems, the “crisis” that led to the formation of the Supercommittee was entirely artificial in nature: the tea party Republicans decided that they would not vote to authorize an increase in the debt ceiling unless the budget was cut for every dollar that the debt ceiling increased. They claimed that the markets would go crazy if they didn’t make this stand, and that interest rates would skyrocket as investors abandoned the US, thus necessitating their budget cuts. And what actually happened? Well, interest rates when down when the Euro threatened to collapse. We borrowed more money and the world did not fall apart. The “crisis” was political in nature, and opportunistic in impulse: no economic force drove the politics that led to the creation of the Supercommittee. It was the tea party’s ambition to gut social spending that made the Supercommittee both necessary and doomed.
Don’t get me wrong: we need to fix our budget problems. But we don’t need to fix them tomorrow. We need to be serious, thoughtful and responsible. We need to be willing to give up things we care about deeply.
The Supercommittee was none of these. It was a gimmick. Good riddance.