With Deadline Nearing, What Happens if Supercommittee Talks Collapse?

The congressional deficit super committee ended the week with no deal in hand and a Wednesday deadline looming. Jeffrey Brown discusses the stalemate over taxes and spending with Janet Hook of The Wall Street Journal.

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    The congressional deficit supercommittee went into the weekend with no deal in hand and a deadline looming next Wednesday. A partisan stalemate persisted over taxes and spending, as the countdown continued.

    From all outward indications at the Capitol, the supercommittee was nowhere near completing its mission today. Republicans and Democrats on the 12-member board remain deadlocked over how to find $1.2 trillion in deficit reductions over the next decade.

    Some of the members met again last night, and, today, the Republican co-chair, Congressman Jeb Hensarling of Texas, said negotiations would continue.


    We are painfully, painfully aware of the deadline that is staring us in the face. We have 12 good people who have worked hard since this committee has been created to try to find sufficient common ground for an agreement.


    The Democratic co-chair, Sen. Patty Murray of Washington, cited the major cause of disagreement.


    Where the divide is right now is on taxes and whether or not the wealthiest Americans should share in the sacrifice that all of us have to make. That's the decision. It's what we're waiting for. I remain hopeful.


    Democrats insist on cutting into deficits in part by raising taxes. Republicans on the committee have offered to raise revenues by closing tax loopholes, but they balk at raising tax rates.

    Within that debate is an argument over the Bush era tax cuts. Democrats want everyone who makes under $250,000 to keep the cut, while letting rates rise for wealthier Americans. That would cost $3.2 trillion over the next 10 years. Republicans want the tax cuts to be made permanent for everyone. That would cost $4 trillion. Republicans also want much larger spending cuts than Democrats do in any deficit package.

    If no agreement is reached, automatic cuts in defense and social spending are supposed to go into effect, but not until 2013.

    Meanwhile, the Republican majority in the House tried today to pass a balanced budget amendment to the Constitution. It was the first such attempt since 1995.

  • WOMAN:

    And the joint resolution is not passed.


    Today, it failed to get the required two-thirds majority.

    Janet Hook of The Wall Street Journal is covering all this on Capitol Hill. And she joins us now.

    So, Janet, as we speak, where do things stand?

  • JANET HOOK, The Wall Street Journal:

    Well, as we speak, Patty Murray said earlier today she was still hopeful, but there aren't too many people who are still hopeful that this group can reach their goal of cutting $1.2 trillion.

    They're really in the realm of last-ditch efforts. They had some closed-door meetings. There was an exchange of some more offers, but so far, they are still at a stalemate. They promised to work through the weekend, but there — and they have basically until Monday to find a breakthrough, but there isn't much sign of that breakthrough happening.


    Now, there were reports of the Republicans putting forward a smaller package in the $600 billion — what — what's in that? What was the Democratic response? And what's the thinking among Republicans to have a smaller package?


    Well, the Republicans were thinking, if the supercommittee can't reach the $1.2 trillion goal, to try to see if there was some kind of consensus smaller package that they could enact.

    And what they tried to do was assemble a bunch of proposals that were less controversial through the budget negotiations, raising fees and smaller cuts in discretionary spending and smaller cuts in defense programs to come up with a package of $640 billion, about, which would be about half of what the goal was.

    The problem with it was — when they presented it to the Democrats, is, the Democrats really want to see more tax increases in whatever package they consider. The Democrats want it to be more of a balance of tax increases and spending cuts.


    Well, Janet, is there a sense of urgency at this point? It's hard to tell. Can you tell what's going on behind the scenes?


    Well, the sense of urgency is because they have this deadline coming up next Tuesday — well, the deadline is Monday for them to submit the proposal for the committee to review.

    And they have to vote on it by Wednesday night at midnight. So that creates a sense of urgency because there is a deadline. But unlike a lot of the other budget debates that Congress has had this year, the consequences of them failing to act are not nearly as immediate.

    Earlier this year, when they were negotiating a spending cut — a spending bill, an overall budget, the deadline was — the deadline was set by the fact that the government was going to run out of money. And so if they didn't act by the deadline the government would shut down. Then later in the summer, the deadline was the government had reached the limit of its borrowing, and Congress had to raise the debt limit. And if they didn't act by that deadline, the government would default.

    And right now, if they don't make this deadline, the consequences are not very immediate. And I think that actually has lifted some of the pressure on them to make these really tough decisions that they're forced to make. Down the line, the consequences are automatic spending cuts will take effect across the government to cut that $1.2 trillion that they are trying to get by a deal. But those spending cuts don't take effect until 2013.


    Well, in these last few days, I mean, we're talking about broad disagreements between the two parties, but how important are disagreements within each party? That is, is there movement — there was movement among some Republicans for some raise in tax revenues.

    And they got hit, swatted real quickly by some House Republicans, right?


    Actually, no, I would say at this point the differences between the parties are much more important than the differences within the parties.

    There have been throughout the negotiations some differences of opinion. Among Democrats, for example, some liberals were really dead-set against making big concessions on cutting entitlement programs like Medicare, and really wanted to hold out against compromising on allowing any extension of the Bush tax cuts.

    And among Republicans, you're right, some have been more willing than others to allow some kind of tax increase as part of the deal. But at this point, I really think that the biggest differences are between the parties.


    So, as this impasse is impending, you sense both sides sort of preparing the ground for a blame game, if we get to that point?



    We have already seen the blame game starting. Everybody comes out of their closed-door meetings basically saying things like, well, the ball is in their court, not ours. We have made big concessions. They haven't.

    There's been a lot of that going on, even back when you felt like there was some serious negotiating going on behind the scenes. And right now, I just don't see much sign of progress…


    And do they…


    … towards any kind of compromise.


    Excuse me.

    Do they see fear — or do they worry about market reaction, about U.S. credit being downgraded again? Does anybody talk about that, as well as the political implications?


    Sure. There is concern that this will spook the markets.

    The one thing about the mechanism that they're working under, though, is it does guarantee for those who are concerned first and foremost that the deficit be reduced, that whether or not this group produces a deficit reduction package, there is supposed to be this fallback mechanism, that if they don't propose a bill to cut $1.2 trillion, there's this mechanism of automatic spending cuts that kicks in a year from now.

    So there are some people who think that the markets won't be as spooked by this failure as they might otherwise be because there is this fallback mechanism. Maybe a more immediate and certain consequence would be in terms of public opinion.

    I mean, this would be another example of Congress failing to deliver on a really big issue that people had been expecting this committee to address. And it's a huge disappointment, though I suppose there are a lot of people who thought that this supercommittee wouldn't be able to do what other committees and commissions and other members of Congress had failed to do all year.


    All right, Janet Hook of The Wall Street Journal, thanks so much.


    Thank you.


    Earlier this week, we talked with a Democrat on the supercommittee, Maryland Rep. Chris Van Hollen. We have extended invitations to all the committee Republicans to appear on the NewsHour. None was available this evening.

    We will continue to try to bring you an interview with one of them next week.