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Things Are Not As They Seem

September 27, 2011 - by Donny Shaw

On January 1, 2013, a perfect storm of major federal policy shifts are set to occur. The Bush tax rates are scheduled to expire, raising taxes on all income earners. The debt-ceiling trigger — assuming the supercommittee gridlocks — would go into effect, causing massive cuts to government across the board. And a host of other tax credits important to businesses and the middle class are scheduled to expire as well.

It’s no coincidence that all of this is happening right after the 2012 elections. It’s designed, on some level, to facilitate a grand bargain to extend the status quo that can be passed by an unaccountable lame-duck Congress (and possibly President), with the maximum amount of time before voters will get another chance to weigh in.

Ryan Grim has a fantastic piece outlining how things may go down:

The most likely scenario: The super committee locks up along partisan lines and, after the 2012 election, bipartisan negotiators deal with the tax cuts and the super committee’s sequestration cuts, along with a basket of other expiring provisions, in one set of negotiations. Democrats will be pressured by the coming sequestration, while Republicans will be motivated by the expiration of the Bush tax cuts. And all of their negotiations will take place in a political and economic climate impossible to predict today.

“All of this at some point comes together,” said Budget Committee Chairman Kent Conrad (D-N.D.) of the Bush tax cuts and the sequestration. “One thing about this place, the paces just keep repeating themselves.”

While many have portrayed the super committee as having some sort of automatic axe, other observers haven’t bought the idea. Stan Collender, a Democratic budget expert and consultant to Wall Street and Washington lobbyists, saw through it quickly, writing a report for Qorvis Communications downplaying the likelihood of the automatic cuts.

“There is a high probability that the super committee won’t be able to agree on a deficit reduction deal and that the across-the-board spending cuts that are supposed to be triggered if that happens will NOT go into effect as scheduled in 2013,” he wrote. “Federal budget agreements have seldom, if ever, gone the distance. Instead, they have always been changed, waived, ignored or abandoned.”

So, as Democratic and Republican politicians dig themselves in rhetorically on these issues over the next year, remember that it’s all likely to change as soon as the election’s over. Don’t assume that President Obama promising not to extend the Bush tax cuts for the rich again is any different from when candidate Obama promised the same thing in 2008. This is another campaign, and the second it’s over we should expect the governing elite to shift from playing to their bases to protecting the interests that helped them gain power.

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