Shortly after President Barack Obama signed the debt plan into law in August, helping the nation avoid default, a so-called congressional “super committee” was formed with the sole purpose of finding ways to make at least $1.2 trillion in deficit reductions by November 23. With the deadline only days away, the committee has yet to come to an agreement, causing anxiety among lawmakers about the repercussions of failing to do so.
Debt Committee to Make Long-Term Deficit Reductions
In August, the nation came dangerously close to its first sovereign default after surpassing the $14.3 trillion national debt ceiling in May. Lawmakers were able to approve a debt plan with only hours to spare that raised the government’s borrowing limit by $2.4 trillion while cutting federal spending by $917 billion.
As a part of the deal, lawmakers required that at least an additional $1.2 trillion be made in deficit reductions to last over the next decade, though the decision on how those reductions would be made was not necessary at the moment. Instead, officials agreed to set up a committee of 12 lawmakers (six Democrats and six Republicans) to tackle the debt in the coming months.
Tax Issues Hinder Lawmakers
On Sunday, members of the now-formed committee revealed that with only a few days left to forge a deal, they remain hung up on basic issues of tax and entitlement reform.
Republicans say they would like to see significant reforms to entitlement programs such as Medicare and Medicaid. Democrats, on the other hand, say any solution must be balanced with spending cuts, entitlement reforms and increased tax revenue, something Republicans strongly oppose.
Recently, Republicans offered a proposal with $1.4 trillion in deficit reduction, including $500 billion in new revenue from capping individual deductions while reducing all six income tax rates by roughly 20 percent. Under this proposal, the top tax rate would drop from 35 percent to 28 percent.
Democrats rejected the plan, stating it would reduce revenue in the long run by permanently extending Bush tax cuts.
With just a few days to devise a plan, both sides are worried that they won’t come to an agreement. However, even if they do, Congress will then face its own battle to agree on the unamended plan as required by December 23. Failure to sign a plan into law by the December deadline would trigger $1.2 trillion in automatic spending cuts to take effect in 2013.
