Everybody knows that screwing up a critical assignment at work will almost surely get you fired.
That is, unless you work as a member of the U.S. Congress.
After more than two months of bickering, the six Republicans and six Democrats on the "super committee" tasked with finding at least $1.2 trillion debt reduction savings over the next decade have thrown in the towel.
They have no debt reduction plan.
Analysts agree that despite the urgency of addressing America's fiscal issues, both sides are more interested in scoring political points than solving problems.
Meanwhile, the federal debt continues to grow. It eclipsed $15 trillion last week.
With representatives pocketing salaries of $174,000 a year despite their failures, it's no wonder U.S. citizens are down on Congress. A recent New York Times/CBS poll showed Congressional approval sinking to just 9%.
Even some members of Congress admit it.
"The politicians care more about their parties and getting reelected than they do the very real problem," Sen. Tom Coburn, R-OK, said Sunday on C-SPAN's "Newsmakers" program. "[The super committee] was Washington's answer to kicking the can down the road."
According to the law passed as part of the debt ceiling deal over the summer, failure of the super committee to come up with a debt reduction plan is supposed to result in $1.2 trillion in automatic cuts, known as "sequestration."
Half of those cuts, $600 billion, are to come from defense spending, with the other half coming from such areas as education, the environment, transportation, housing assistance and veterans' healthcare.
But just because that's what the law says doesn't mean it will happen. Congress, don't forget, can undo any laws it creates. Ideological opposites Sen. John McCain, R-AZ, and Rep. Maxine Waters, D-CA, among others, are already working on this.
It's just more evidence of a disingenuous Congress.
Instead of developing a deficit reduction solution, lawmakers have tried to convince the American people that the super committee's failure is the other party's fault.
Democrats had called for a "balanced" approach of some higher taxes, mostly on the wealthy, and spending cuts. Republicans eschewed any increase in taxes, preferring instead to reach debt reduction goals entirely through spending cuts.
"The wealthiest of Americans, those who earn more than $1 million every year, have to share, too. And that line in the sand, we haven't seen any Republicans willing to cross yet," super committee co-chair Sen. Patty Murray, D-WA, said on CNN's"State of the Union."
"I don't understand the economics that says that if we raise taxes on my employer, or my boss, somehow they're going to go out and hire my unemployed brother-in-law," Rep. Jeb Hensarling, R-TX, another committee co-chair, countered on "Fox News Sunday."
Why so much rhetoric and no action?
The main reason is that the automatic cuts don't kick in until January 2013 – after the key 2012 elections. Both sides hope to pin the blame on the other side to secure election victories next November that will empower them to solve the debt problem their way.
Subtraction by Inaction
One bizarre irony of the Washington gridlock is that a truly do-nothing Congress could result in debt reduction far beyond the original $1.2 trillion goal. If Congress fails to extend the Bush-era tax cuts, which expire at the end of 2012, the government could triple its savings.
According to Jim Horney, vice president for Federal Fiscal Policy at the Center on Budget and Policy Priorities, the expiration of the Bush tax cuts combined with the sequestration savings of $1.2 trillion would add up to a whopping $7.1 trillion in deficit reduction over the next decade.
However, while the expiration of the Bush tax cuts would be good for the federal budget – Horney estimates the United States would have a nearly balanced budget by 2021 – it would take a lot of money out of citizens' pockets.
Investors would get hit particularly hard, since they'd not only be paying higher income taxes but also higher tax rates on capital gains and dividends. Capital gains rates would rise from 15% to 20%; dividends would be lumped in with your income and taxed at that rate, rather than the 15% it is now.
American wallets could get hit even sooner if Congress fails to renew the payroll tax cuts and extended unemployment benefits for next year. That will mean less money in everyone's paycheck starting in January.
Of course, that's a lot easier to take when you're a millionaire pulling down $174,000 a year.
Perhaps most galling of all is that our overpaid lawmakers know they're failing.
"I'm ashamed. I have to go back and apologize for what we're doing," Sen. Joe Manchin, D-WV, said on the CBS program "Face the Nation" on Sunday.
News and Related Story Links:
- Money Morning:
It's Not Just Congress – the System Has Failed
- Money Morning:
How the Debt-Ceiling Debacle Will Spark a Short-Term Drop in Gold Prices
- Money Morning:
A Toothless Debt Deal Won't Stop a U.S. Credit-Rating Downgrade – Or the Aftermath that Follows
- Money Morning:
President Obama Tackles Deficit Reduction and Debt Ceiling as Budget Battle Continues
- The Washington Post:
Why doing nothing yields $7.1 trillion in deficit cuts
- Yahoo! Finance:
The Not-So-Super Committee Fails, As Expected
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- Bloomberg News:
Supercommittee Likely to Announce No Deal on Deficit Cuts