Charged with trimming more than $1 trillion in spending, the congressional "super-committee" has been ominously silent about the prospects of the bipartisan group brokering a deal by its Nov. 23 deadline. In an interview with News Bureau Business and Law reporter Phil Ciciora, Richard L. Kaplan, a law professor and expert on taxation, discusses the likelihood of the six Democrats and six Republicans reaching a consensus, and what that could mean for taxes and spending cuts for government health care and retirement programs.
Why outsource this sort of high-stakes decision to a committee that meets in secret? Isn't that a prescription for more legislative gridlock?
The experience this past summer with the battle to increase the federal debt ceiling revealed some very serious political fault lines that Congress is apparently unwilling or unable to bridge. This new mechanism provides a different and largely untried approach: A majority of a designated bipartisan group must develop a set of deficit reduction proposals that are to be accepted or rejected as a whole, with no amendments or filibusters allowed. And if those proposals do not get enacted or are insufficient, a so-called "sequester" will cut government programs automatically.
Of course, there is no guarantee that this super-committee route will prove successful, or that Congress will not change the new statute's implementation timeline. But we will find out in fairly short order.
The joint committee has been charged with cutting $1.5 trillion in current baseline spending. What exactly does "baseline" mean?
The Budget Control Act of 2011 defines the budget baseline as current law. What this means is that the Bush-era tax cuts enacted in 2001 and 2003 are assumed to expire at the end of next year. If Congress or the president decides to extend those cuts beyond 2012, an additional $3 trillion of spending cuts over the next 10 years will be required. The same phenomenon applies to the so-called "doc fix" that will cut Medicare's payments to physicians by nearly 30 percent starting on Jan. 1, 2012.
If those cuts are prevented, as they have been for the past eight years in a row, the super-committee will need to find a further $300 billion of spending cuts to meet its statutory target.
What happens if the bipartisan group can't come up with $1.2 trillion in cuts, as most pundits are predicting?
The law states that if less than $1.2 trillion in spending cuts pass the Congress by Dec. 23, 2011, most government spending programs will be cut to make up the difference. So if only $900 billion in spending cuts are enacted, the sequester must produce the remaining $300 billion in spending cuts.
Are all government-spending programs subject to spending cuts?
No. Neither Social Security nor Medicaid will be affected by any sequester that goes into effect. And Medicare's cuts are limited to 2 percent of its budget, with a further requirement that none of those cuts can come from increased expenses paid by Medicare beneficiaries through higher monthly premiums, deductibles or co-payment obligations.
On the other hand, half of the "sequestered" spending cuts must come from the defense budget other than operations in Afghanistan and Iraq.
Are any tax changes mandated by the sequester?
The super-committee can decide to offer tax changes, including rate increases, as part of its deficit reduction proposals, but the committee is not required to do so. If the sequester takes effect, no tax changes would go into effect automatically.