Congress May Try Blocking Cuts if Debt Panel Fails

**Prince** · 11-21-2011, 10:21 AM

Congress May Try Blocking Cuts if Debt Panel Fails

WASHINGTON – Congress is facing automatic cuts of $1.2 trillion over 10 years if a 12-member Super Committee can't agree to a package of expanded tax revenues and spending cuts, but lawmakers are looking for a way around the "sequestration" and avoid any painful reductions to their favored programs.

Sens. John McCain, R-Ariz., and Lindsey Graham, R-S.C., say they are writing legislation to prevent what they say would be devastating cuts to the military. Democrats maintain they won't let domestic programs be the sole source of savings.

Lawmakers have until the end of the day to get a plan out to the Congressional Budget Office to evaluate the numbers and still give two days for it to be presented by the Nov. 23 deadline. According to the plan, if a deal isn't reached, the savings will be found by chopping half from the defense budget and half from entitlement and domestic spending programs.

With that in mind, lawmakers are looking for an end run to their own law since cuts won't hit until 2013.

"I am committed to insuring that the American people get that deficit reduction that they were promised," committee co-chairman Rep. Jeb Hensarling, R-Texas, said on "Fox News Sunday." "But under the law, Congress will have 13 months to do that in a smarter, more prudent fashion."

"We do have the opportunity, even if the committee fails, to work around the sequester so that we still have $1.2 trillion in savings over 10 years, but it's not done in the very Draconian way that Defense Secretary (Leon) Panetta is referring to," said Sen. Jon Kyl, R-Ariz., on NBC's "Meet the Press."

President Obama has already threatened to veto "any measure that attempts to turn off the automatic cut trigger," according to spokesman Jay Carney, and Republican House Speaker John Boehner has said he would vote against efforts to change the provisions of the deal.

Mind-boggling to many is the fact that the $1.2 trillion in cuts over 10 years is a fraction being applied against a budget that calls for $44 trillion in spending over the same time period.

"I have no doubt that there will be efforts to turn it off," said Maya MacGuineas, president of the nonpartisan Committee for a Responsible Federal Budget. "Never underestimate the willingness of politicians to try to avoid making some of the hard choices."

Sen. Jeff Sessions, R-Ala., ranking member on the Senate Budget Committee, faulted President Obama for not getting involved.

"The Republican House laid out a good plan. The president, except for his irresponsible budget and the Republican Senate, has done nothing to lay out a plan that can be analyzed by the American people," he said.

"The commander-in-chief is absent from battle," he told Fox News.

When the debt committee was first organized over the summer, the White House was left out of the negotiation in order to reduce any feared injection of politics, and let the lawmakers communicate among themselves.

That failed, however, in part, says Sen. John Kerry, D-Mass., a member of the debt panel, because Republicans refuse to allow tax increases on the highest earning Americans.

Revenues are at a 60-year low. They're at 14 or 15 percent of all of our GDP. Traditionally they're at 18 percent, 19," Kerry said. "Fair and balanced is not giving the wealthiest people in America tax cuts while you ask people on Medicare and Medicaid to pony up more. ... The only thing blocking us is the insistence on the Bush tax cuts for the wealthy."

But Kyl told Fox News on Monday that Democrats only want to raise taxes, even if it's not necessary.

"The committee was charged with finding another $1.2 or $1.5 trillion, and that they're not willing to do unless Republicans are willing to raise taxes," he said.

Committee co-chair Sen. Patty Murray was headed to the White House on Monday to attend a bill signing for a tax incentives package aimed at getting employers to hire veterans. The White House confirmed Murray will be there for the bill-signing only.

The committee could do its work in halves. For instance, if the panel produces less than $1.2 trillion in savings, automatic cuts are activated to make up the difference. So $800 billion in savings from the Super Committee would trigger $400 billion in automatic cuts.

By law, 18 percent of the automatic savings are assumed to come from interest costs the government would save from reducing the debt. If the Super Committee fails completely, out of the $1.2 trillion in automatic savings, $216 billion would be assumed interest savings.

That would leave $984 billion in automatic spending cuts over 10 years. That works out to around $55 billion annually each from defense and domestic programs though a CBO analysis shows that comes out to 10 percent of the Pentagon budget in 2013 alone, a huge hit.

"Unless we act today, the dismantling of the greatest armed forces in history could begin tomorrow," Rep. Howard P. McKeon, R-Calif., chairman of the House Armed Services Committee, wrote Super Committee leaders on Friday in a letter warning them of the consequences of the automatic defense reductions.

On the domestic side, the law exempts Social Security, Medicaid and many veterans' benefits and low-income programs. It also limits Medicare to a 2 percent reduction. That leaves education, agriculture and the environment programs exposed to cuts of around 8 percent in 2013, according to the CBO. For many Democrats, those are cuts worth fighting against, especially if Republicans try protecting defense programs.

"If they're going to try to protect defense, there'll be pushback," said Rep. Jim McGovern, D-Mass.

Read more: Congress May Try Blocking Cuts If Debt Panel Fails | Fox News

**Dale Mabry** · 11-21-2011, 10:55 AM

Gotta love our leaders, this shows you how serious they are about paying our debt.

**Big Pimpin** · 11-21-2011, 11:22 AM

Sorry mother fuckers both the Republicans and the Democrats.

**LAM** · 11-21-2011, 11:26 AM

corporate tax dodgers have reduced fed revenues by 2T over the past decade. the tax haven act needs to get passed. the US has the lowest effective corp tax rates in the world, those company's can threaten to move but they aren't going anywhere. large firms do not control the gov in the EU like they do in the US. those monies could be used to fund capital projects all over the country. most workers can not afford to move to locations that are short skilled workers. we need to bring jobs to the workers not the other way around.

25% of US homeowners are upside down as of 2010 and US home values still need to drop a good 25% to be where they would have been naturally with out being overinflated by the tax payer relief act of 1997. which changed the taxes on capital gains from home sales from the once in a lifetime gift to every 2 years. that act is what got the whole housing boom, bubble and burst started.

**Big Pimpin** · 11-21-2011, 11:35 AM

Originally Posted by LAM

corporate tax dodgers have reduced fed revenues by 2T over the past decade. the tax haven act needs to get passed. the US has the lowest effective corp tax rates in the world, those company's can threaten to move but they aren't going anywhere. large firms do not control the gov in the EU like they do in the US. those monies could be used to fund capital projects all over the country. most workers can not afford to move to locations that are short skilled workers. we need to bring jobs to the workers not the other way around.

25% of US homeowners are upside down as of 2010 and US home values still need to drop a good 25% to be where they would have been naturally with out being overinflated by the tax payer relief act of 1997. which changed the taxes on capital gains from home sales from the once in a lifetime gift to every 2 years. that act is what got the whole housing boom, bubble and burst started.

I have a $75K warehouse which will be completed around 12/11 and a $55K '12 F-250 4wd Powerstroke which will be here this Wednesday. Both are 100% depreciatable for 2011 and both were purchased so I don't have to pay taxes on that income.

Am I a corporate tax dodger?

**LAM** · 11-21-2011, 06:41 PM

Originally Posted by Big Pimpin

I have a $75K warehouse which will be completed around 12/11 and a $55K '12 F-250 4wd Powerstroke which will be here this Wednesday. Both are 100% depreciatable for 2011 and both were purchased so I don't have to pay taxes on that income.

Am I a corporate tax dodger?

those are capital expenditures which is not even the same as not paying any federal taxes on profits

**oufinny** · 11-21-2011, 09:14 PM

This was all some backroom bullshit to string the public along, no deal was ever going to come out of this. They didn't even go until the end, they gave up today and made little to no effort to do anything. This right here shows how polarized both parties are and how out of touch they are with the electorate.

**GearsMcGilf** · 11-21-2011, 09:39 PM

Originally Posted by LAM

corporate tax dodgers have reduced fed revenues by 2T over the past decade. the tax haven act needs to get passed. the US has the lowest effective corp tax rates in the world, those company's can threaten to move but they aren't going anywhere. large firms do not control the gov in the EU like they do in the US. those monies could be used to fund capital projects all over the country. most workers can not afford to move to locations that are short skilled workers. we need to bring jobs to the workers not the other way around.

25% of US homeowners are upside down as of 2010 and US home values still need to drop a good 25% to be where they would have been naturally with out being overinflated by the tax payer relief act of 1997. which changed the taxes on capital gains from home sales from the once in a lifetime gift to every 2 years. that act is what got the whole housing boom, bubble and burst started.

I'd say the artificially low interest rates for several years (i.e. fed funds rate of 1%) probably contributed the most to the RE bubble. As a banker, it seemed that for a while, anyone who could smell equity in a RE holding was running to the bank to take out a LOC and dump the cash into another RE investment. The debt was easily sustainable at those rates. But, by the time the fed decided to put the brakes on the drunken borrowing orgy and raise rates, everyone and his friggin brother were sitting on masses of debt once their monthly interest payments basically doubled and nothing was selling anymore, they were all fucked and so were the banks. It was basically a house of cards just waiting to collapse. Frankly, I'd say the best solution would be to drop a nuke on both Wall Street and DC.

Anyhoo, we are among the lowest in OECD nations at 1.8% of GDP. But, I don't think that comparing EU countries to the US on that basis really makes a good argument for raising corp rates. Look at Greece and Italy. Both are over 3% and on the verge of bankruptcy.

Here's a couple of links that should give something LAM to do until 2:00am tonight.

www.cbo.gov/doc.cfm?index=6902

And dig this. Look at Germany with an effective rate of 1%.
Germany - Economic forecast summary (May 2011)

I'll be looking forward to reading the 5,000 word response.

**LAM** · 11-21-2011, 10:14 PM

Originally Posted by GearsMcGilf

I'd say the artificially low interest rates for several years (i.e. fed funds rate of 1%) probably contributed the most to the RE bubble. As a banker, it seemed that for a while, anyone who could smell equity in a RE holding was running to the bank to take out a LOC and dump the cash into another RE investment. The debt was easily sustainable at those rates. But, by the time the fed decided to put the brakes on the drunken borrowing orgy and raise rates, everyone and his friggin brother were sitting on masses of debt once their monthly interest payments basically doubled and nothing was selling anymore, they were all fucked and so were the banks. It was basically a house of cards just waiting to collapse. Frankly, I'd say the best solution would be to drop a nuke on both Wall Street and DC.

Anyhoo, we are among the lowest in OECD nations at 1.8% of GDP. But, I don't think that comparing EU countries to the US on that basis really makes a good argument for raising corp rates. Look at Greece and Italy. Both are over 3% and on the verge of bankruptcy.

Here's a couple of links that should give something LAM to do until 2:00am tonight.

www.cbo.gov/doc.cfm?index=6902

And dig this. Look at Germany with an effective rate of 1%.
Germany - Economic forecast summary (May 2011)

I'll be looking forward to reading the 5,000 word response.

low rates by the central bank definitely added fuel to the fire and deregulation in the sub-prime markets was the coup de gras. once shadow and the hedge funds, etc. took over it was a wrap since they operate under the scope of federal over-site.

I'm not for increasing capital gains but lowering them isn't an option. it won't do a thing to help the economy, a shortage of investment capital there certainly is not, just no where to invest it in this stupid consumption based economy. corp tax dodgers need to pay up and we need to get that tax haven act passed.

Greece dropped the ball when they adopted the Euro before having their financial system in place to make enough profits to pay for their short debt orgy. they only have a workforce of 5million, that's like 50% of the population in PA or the LA metro population.

Italy I have not studied up on much in terms of economics but from my travels there I know the north is much more productive than the south.

**TJTJ** · 11-22-2011, 12:31 AM

**Dale Mabry** · 11-22-2011, 04:52 AM

Originally Posted by oufinny

This was all some backroom bullshit to string the public along, no deal was ever going to come out of this. They didn't even go until the end, they gave up today and made little to no effort to do anything. This right here shows how polarized both parties are and how out of touch they are with the electorate.

Is polarizing really the right word? I mean, when one group says we'll give you 3 cuts to your 1 tax increase and the other group says absolutely no tax increase all spending cuts you really aren't dealing with opposite ends of a spectrum, you are dealing with the far right of it and center right of it.

**Dark Geared God** · 11-22-2011, 02:48 PM

Its still bush's fault

**hypno** · 11-22-2011, 05:21 PM

Originally Posted by Big Pimpin

Sorry mother fuckers both the Republicans and the Democrats.

They have all been bought off and serve big money not us.

**lnvanry** · 11-22-2011, 10:08 PM

McCain and Graham's actions are neutered...Obama already went on the record this morning and said any legislation that would prevent sequestration and protect the DoD budget as is

**LAM** · 11-22-2011, 10:58 PM

Originally Posted by Dark Geared God

Its still bush's fault

'Horrendous': Nobel economist George Akerlof criticizes Bush administration's economic stimulus package

"We shouldn't call it a stimulus package until there is evidence to show that in fact it is a stimulus package. Right now there is no such evidence. It's a horrendous bill. This must be well known by every single member of Congress, and I am sure that it is clear in the reports from the Congressional Budget Office, which has always done a good job. But the public does not seem to be aware of the extraordinarily serious consequences of this stimulus package."

'Horrendous': Nobel economist George Akerlof criticizes Bush economic stimulus package

Ten Nobel Laureates Say the Bush Tax Cuts Are the Wrong Approach

George Akerlof* University of California – Berkeley
Kenneth J. Arrow* Stanford University
Peter Diamond Massachusetts Institute of Technology
Lawrence R. Klein* University of Pennsylvania
Daniel L. McFadden* University of California – Berkeley
Lawrence Mishel Economic Policy Institute
Franco Modigliani* Massachusetts Institute of Technology
Douglass C. North* Washington University
Paul A. Samuelson* Massachusetts Institute of Technology
William F. Sharpe* Stanford University
Robert M. Solow* Massachusetts Institute of Technology
Joseph Stiglitz* Columbia University
Laura D’Andrea Tyson London Business School
Janet Yellen University of California – Berkeley

http://www.berkeley.edu/news/media/r...economists.pdf

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