'Super Committee' Failure Isn't All Bad

November 23, 2011 - 11:52 AM

The only thing more predictable than the failure of the "super committee" to reach a deal is that the media would automatically call it a "failure" if the committee was unable to reach a deal.

No deal was going to happen unless Republicans caved in a huge way on taxes and accepted Democrats' demands for huge tax hikes. That was never going to happen. For a thorough explanation of why, Google "George Bush read my lips" and look up the 1992 presidential election results.

So, unless Democrats stopped being Democrats and agreed to major entitlement reform and real spending cuts - rather than mere cosmetic and illusory reductions in the planned rate of growth of spending - there was never going to be a deal.

Had Republicans caved on taxes and accepted Democrats' position on spending, there would have been a deal, and the media would be proclaiming it a "success" today. The math is simple: for Democrats and their media friends, Congress is only "successful" if it spends more and taxes more.

Which explains why the New York Times, in an "analysis" piece today, could say "There is still plenty of time for Congress to ... renounce frugality."

Frugality - not overspending - is the real problem to the New York Times. To the Left, frugality (with other people's money) equals failure, but governmental greed – taking more money from your pocket to continue super-sizing Big Government – is good.

But from the other side of the ideological divide, it's hard to see the Super Committee's failure as, well, failure.

Here is what the Super Committee accomplished by agreeing to nothing:

1. It didn't raise taxes.

2. It triggered automatic spending cuts.

As that New York Times points out, the annual federal budget deficit will decline rapidly given the Super Committee's decision to do nothing:

The latest congressional failure to agree on a plan for balancing the government’s books could yield a surprising result: a sharp reduction in annual federal deficits, larger than anything contemplated by the special panel that reached its fruitless finale on Monday.

That's because of something else the Super Committee didn't do: It didn't alter the "Bush tax cuts," set to expire at the end of 2012.

Tax cuts passed in the Bush administration will expire at the end of 2012. By law, the panel’s failure triggers new caps on spending, cutting $1.2 trillion from the military, education, health care and other priorities over 10 years beginning next fall.

The combined impact of higher tax rates and less spending would reverse the growth of annual deficits beginning in 2013, reducing by more than half the current $1.3 trillion gap between annual revenue and spending.

That has inverted the normal reality, in which spending rises inexorably unless Congress musters the political will to impose cuts. Now, although both parties say they are committed to more gradual approaches, an agreement is required to avoid the fiscal equivalent of shock therapy.

“There could be a bit of a silver lining,” said Rosanne Altshuler, an economist at Rutgers University who served on President George W. Bush’s 2005 tax reform panel. “It forces us to come to terms with cuts in areas that have been difficult to touch — the military and Medicare. We may not like how the cuts are going to be done, but we better start dealing with the fact that cuts are going to have to be made.”

Conservatives see the potential end of the Bush-era tax reductions as a "failure," and it may yet be, but right now it creates an opportunity and gives increased clarity to the 2012 election contest. Faced with a choice between more money in their pockets from lower taxes and less money and more regulation, it's tough to see the public opting for the liberal argument.

The "failure" of the Super Committee has succeeded in making very clear the difference between the two parties on taxes and spending. Republicans want to cut spending and keep taxes low. Democrats and President Obama are intransigent in their insistence that taxes must be increased to pay for inexorable, near-geometric spending increases, at the same time claiming they want fiscal responsibility.

The danger for Republicans is that they will focus on defending the specific Bush tax cuts against the expected demagoguery from Democrats and President Obama rather than the general proposition that low taxes are better for the economy. Avoid that trap and even the Super Committee's "failure" to address the Bush tax cuts may sow the seeds of success.

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