Much of the direction of the nation’s spending and economic recovery rests in the hands of the members of the Joint Select Committee on Deficit Reduction, known as the Super Committee. The committee has until November 23 to submit a plan to Congress to reduce the deficit by $1.2 trillion in ten years. But it needed to reach an agreement during the week of November 7 to have time for the proposal to be scored by the Congressional Budget Office and to actually write the legislation. There are no signs that that the committee is nearing agreement.
A plan offered by five Democrats was rejected by the committee on November 7. It would have reduced the deficit by $2.3 trillion with near equal spending cuts and raised revenues. As part of its $1 trillion in spending reductions, the plan would have made $200 billion cuts in non-defense discretionary spending, the area of the budget that includes affordable housing programs. Non-defense discretionary funding was already cut and capped by the Budget Control Act, passed by Congress in August (see Memo, 8/5). The Obama Administration has taken the position that non-defense discretionary funds have already been as much as possible and that the Super Committee should find savings elsewhere.
The Democratic proposal also had $1 trillion in increased revenue, including new revenues, tax reform provisions and a trigger to insure spending cuts took effect only when tax reform was enacted. The plan would reduce the deficit by $650 billion through tax reform, but if tax reform was not enacted, reduced tax deductions for higher income tax payers and a charge on income tax liability before applications of credits would go into effect. These two changes would produce $650 billion to offset the loss of tax reform revenue.
The Republican plan, put forth by Senator Patrick Toomey (R-PA), would provide new tax cuts for wealthy taxpayers and rely on increases in taxes for low and middle income households, as well as cuts to programs benefitting those households, to provide most of the plan’s savings. The majority of the plan’s cuts would come from entitlement programs, but discretionary programs would also be cut by hundreds of millions of dollars. The plan included reform to two tax breaks that benefit wealthy households: the mortgage interest deduction (MID) and the charitable deduction. The Democrats did not find the Toomey plan acceptable.
While Committee Co-chair Jeb Hensarling (R-TX) publically expressed his hope that the Committee would still come to agreement, citing the Republican plan as a step forward, Democrats are holding to their demand that $1 trillion in increased revenue should be the plan.