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Congress’ Supercommittee Collapses in Failure, Stock Markets Plunge
McClatchy / News Report
Published: Tuesday 22 November 2011
“Stocks tumbled Monday in anticipation of the supercommittee announcement as the Dow Jones Industrial Average plunged 248.85 points.”
The failure Monday of Congress' supercommittee — the bipartisan panel that was supposed to cut at least $1.2 trillion from looming federal deficits — will trigger a fresh series of partisan clashes over taxes, spending, Social Security and a host of other fiscal matters, clashes likely to be begin immediately.
The collapse of the 12-member panel, announced Monday in a joint statement by co-chairs Sen. Patty Murray, D-Wash., and Rep. Jeb Hensarling, R-Texas, sent U.S. stock prices plunging and created at least another year's worth of fiscal uncertainty in Washington, smack in the middle of an already contentious 2012 election campaign.
"After months of hard work and intense deliberations, we have come to the conclusion today that it will not be possible to make any bipartisan agreement available to the public before the committee's deadline," the co-chairs said.
About the only thing the panel agreed on was the final statement of surrender, a four-paragraph press release that vowed to keep fighting for fiscal discipline.
When Congress returns Monday from a Thanksgiving recess, it will quickly confront at least four thorny issues that need to be resolved in the next few weeks.
Lawmakers must consider extending this year's Social Security 2 percent payroll tax cut; approving extended unemployment benefits; adjusting the Alternative Minimum Tax so it doesn't hurt the middle class; and changing how physicians are paid for Medicare patient care.
Each is likely to detonate new partisan skirmishes. Each also could increase the deficit, which reached $1.3 trillion the last fiscal year. The national debt climbed over $15 trillion last week.
Next year will bring new challenges. The Bush-era tax cuts expire at the end of 2012, and because of the supercommittee's failure, $1.2 trillion in automatic spending cuts are to be triggered starting in January 2013. Half will come from defense, half from domestic spending, but lower-income programs and Social Security will be exempt. Medicare cuts would affect providers but not beneficiaries.
Partisan confrontations are likely on each of these issues in an election year when voters are disgusted with Washington, and financial markets are increasingly rattled by Washington's inertia. Stocks tumbled Monday in anticipation of the supercommittee announcement as the Dow Jones Industrial Average plunged 248.85 points.
An hour after the supercommittee officially gave up, Standard & Poor's said the U. S. government's credit ratings "are not affected by the announcement." It remains AA+, downgraded Aug. 5 from the previous AAA.
But the agency warned that if budget limits enacted this summer are eased, pressure to downgrade "could build."
President Barack Obama appeared after the panel's collapse in the White House briefing room and put the blame squarely on Republicans. Too many Republicans in Congress "have refused to listen to the voices of reason and compromise that are coming from outside of Washington," he said.
And don't try to undo the automatic cuts, he warned Congress, unless there's an equally bold alternative.
"Already some in Congerss are trying to undo these automatic spending cuts. My message to them is simple: No," Obama said. "I will veto any effort to get rid of those automatic spending cuts ... there will be no easy off-ramps on this one.
"We need to keep the pressure up to compromise, not turn off the pressure," he said.
The mood on Capitol Hill was glum, and analysts said the down mood was well-founded.
"All in all, this is just a stunning combination of cynicism and irresponsibility," said Burdett Loomis, a professor of political science at the University of Kansas. "This deadlock and the general lack of progress made bodes very poorly for upcoming basic decisions in a political year."
The committee, created as part of the August agreement to raise the government's debt limit, could not agree because the two parties would barely budge off long-held positions. Democrats insisted that any deal must include big revenue-raisers, including higher taxes on the wealthy. Republicans insisted on targeting spending on entitlements such as Medicare.
It became clear last week that neither side would give in. Even as the deadline approached, no meetings were held, as each side weighed the politics of stubbornness.
Democrats were well aware that if the committee failed, they still could achieve many of their policy goals. The Bush-era tax cuts will expire after 2012 if nothing is done, meaning the current top tax rates of 33 percent and 35 percent would revert to 36 percent and 39.6 percent. In addition, automatic across-the-board spending cuts totaling as much as $1 trillion over nine years would begin in January 2013, but programs for the poor will be protected.
Republicans, on the other hand, think they gain politically because they blocked higher taxes, at least for now. And many of them hope to alter the automatic spending cuts before 2013 to protect defense.
"Both parties have great election arguments," said Larry Sabato, director of the University of Virginia Center for Politics. "Obama uses this as part of his campaign against the do-nothing Congress. Republicans say, 'We're the only thing that stands between you and big tax hikes.'"
Independent analysts think the politicians are engaged in a dangerous game.
"I fear what's going to happen is we're going to descend into election-year politics. They're honing the blame game," said Robert Bixby, executive director of the Concord Coalition, a nonpartisan budget watchdog group.
Bixby predicted that lawmakers likely will try to remove or change the automatic 2013 triggers before they kick in — further alienating the public and alarming financial markets.
"Their credibility is pretty darn low, but it will go even lower if they try to fix the triggers," Bixby said.
The next fiscal flashpoint could come as soon as next week. Many lawmakers are uneasy about continuing this year's 2 percentage point cut in the Social Security tax, fearing it will starve the system's trust fund and increase the federal deficit. The tax paid by employees would return to 6.2 percent next year if nothing is done.
Other provisions also require quick action. Medicare payments to doctors would drop as much as 29.5 percent next year unless Congress acts. The Alternative Minimum Tax could have an impact on middle-income taxpayers unless adjusted.
Provisions allowing unemployed people to get up to 73 weeks of extended benefits would expire, and an estimated 2.1 million people could lose benefits through mid-February. Regular benefits are available for up to 26 weeks, but in states with higher jobless rates, those without work can get more.
"Something's got to be done about that stuff," said Alice Rivlin, a former budget director and Federal Reserve vice chair, "and it's expensive."
The supercommittee chairs' statement said they still hope Congress can find a way.
"Despite our inability to bridge the committee's significant differences, we end this process united in our belief that the nation's fiscal crisis must be addressed and that we cannot leave it for the next generation to solve," the co-chairs said. "We remain hopeful that Congress can build on this committee's work and can find a way to tackle this issue in a way that works for the American people and our economy."
Obama on Monday did sign a small piece of a $447 billion jobs package into law. It will repeal a requirement, scheduled to take effect in 2013, that government withhold 3 percent of payments to almost all contractors. The bill also will award breaks for companies that hire military veterans.
The rest of Obama's 3-month-old jobs proposals have languished, and few if any have much chance of passage. Still, the president said Monday: "My message to every member of Congress is keep going. Keep working. Keep finding more ways to put partisanship aside and put more Americans back to work."
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10 comments on "Congress’ Supercommittee Collapses in Failure, Stock Markets Plunge"
November 23, 2011 6:49pm
. . . ANOTHER BAIL-OUT ?.?.?.? new name ?? last depression they jumped out windows, today bail-out ????
F R A U D. . . . . .FLIM-FLAM
November 23, 2011 5:02am
The answer to your question is simple: The 1% can't see how they are disrupting the lives of the 99% or the lives of their (and other) people's children; there are too many dollar signs clouding their vision.
November 22, 2011 7:05pm
I agree with Bionicknight.I completely disagree with the basic premise of the article's authors. Why was the market swoon on Monday related to the StuperCommittee whereas the swoons over the end of Oct/1st of Nov was not? The market dropped before the announcement on Monday. In fact after the announcement, the market recovered just a bit. No, the market is still stuck in a volitle pattern as a result of low demand (lack of jobs) and anxiety over the euro and the potential collapse of European unity.The markets are most likely far too concerned about deficits and other BS misdirections. But the StuperCommittee was dismissed as nonsense months ago.
November 22, 2011 4:31pm
Ron Paul is conning you... COrporate rule was set in stone in 2001, and Ron Paul will not extract them from government for you, because Ron Paul doesn't believe in modern government regulation of capitalism-Government is not your problem; government infested with corporate money; and the corporate owned SCOTUS are your problem- Extract the parasite, and libertarians, progressives; you know citizens? rejoice-Elect Ron Paul and we will still wait for you, it will just take longer and become very bloody in the process , and no, just because you support ROn Paul now does not mean you, or those similar to your political compass, will be spared being bled out...
November 22, 2011 4:29pm
THe DoD, the -1%ers and the republicans have a sure fire way to prevent any defense spending cuts and actually increase the DoD's budget. Yet another 911. Probably in the works already. Scary are the times when you're taking money from a general's pocket.
99
November 22, 2011 3:51pm
I enjoyed your post, bionicknight. It's in line with things I've been thinking for a long time, and I can add a strange (and not happy) twist: I always presume that the wealthy are at least moderately intelligent. Not, as a rule, awfully smart, since I've noticed the high percentage of them that don't have much mastery of their own language's grammar and syntax. But - presuming they're moderately intelligent, they ought to recognize the teriffic gamble they're taking on their children's lives. History shows the gamble they are taking with us 99% is one that has been played many, many time in the past. In virtually every case, eventually the 99% rose up and butchered the children of the 1%. I think I'd rather have my kids be honest and hardworking - as they are - than threatened with a brutal ending by my own selfish and socipathic attitudes about wealth.
November 22, 2011 1:37pm
First- do away with the Federal Reserve. Ron Paul is right. They are sucking the blood out of us and future generations. You need a committee to reduce spending? .... You need a people committee... No one who is worried about getting re-elected allowed! 'Real People' who live in this war mongering country on a day to day basis, not in some ivory tower. 'Real People' (the 99%) knows where the waste is, the excess, the blood sucking thievery taking place, the lies to scare us. 'REAL PEOPLE' COULD GET THE F'ING JOB DONE...
November 22, 2011 12:48pm
THE NEW AMERICAN PIRATES, ARE KILLING AMERICANS.
This is not about glamorized or fictional piracy. This is, “real piracy.”
Hundreds of our wealthiest leaders and most powerful corporations know that in the next few years, they will be able to siphon, skim, and steal, so much “NEW CASH,” that they and their progeny will be ultra-rich for generations to come.
No, this is not funny, or fiction, or a conspiracy, it is just simple greed and simple theft.
The new pirates of America have launched an all-out siege on us in order to capture, amass, and hold trillions of dollars for themselves.
All of the recent political power grabs and nonsensical debating is purely a slight-of-hand deflection. President Obama, Democrats, Republicans, the International Press, and even the Tea Party, are watching the tiny pea in the shell game…while the rich and powerful “Piratical Right” is stealing America right out from under us.
Consider that their combined total plunder from corporate flipping, downsizing, offshore labor, speculation, price fixing of oil and energy plus, corruption in defense, healthcare, banking, student loans, foreclosures, etc., etc., is a trillion dollar treasure for these pirates.
Go ahead, put your own calculator to it.
Are they smarter than we are? Yes, and they are laughing at us. I, we, you, and all of us, have not been able see the big picture of what is happening to our own country and to our own people. The rape and theft of America, has been cleverly packaged, promoted, and sold under the guise of “cost-cutting,” “deregulation,” and “free enterprise.”
The “Piratical Right” is directly responsible for millions of people dying, getting sick, losing their jobs and homes, losing their ability to fight, their spirit, and even losing their will to live. The sick smell of this carnage now permeates the air across America.
To us, this is all unimaginable, because we look for some sense or the morality of things. These modern-day American pirates however, have no moral compass. They are devoid of any conscience, humanity or soul, and are feeding on the flesh of the American people.
Don’t look to the President, the Senate, Congress, the press, or any political party to help. Sadly, they just don’t see it, don’t care, or are part of it. “We the people” are on our own. Start asking questions. Demand answers. If we don’t fight back America…who will?
History has taught us how to stop piracy.
V
November 23, 2011 2:33pm
TOUCHE!!! Very well spoken. I couldn't have said it better myself.
November 22, 2011 12:38pm
Artificial Scarcity
Artificial Scarcity occurs when the supply of X is controlled to make it scarce on purpose when the reality is that the supply of X is virtually unlimited. This is usually done to make X worth more than it really is, and thus increase profits for those who are the purveyors of X.
The easiest example of this is food. Every year millions of tons of food end up in landfills because the stores that bought it were not able to sell it. They rather throw it away to keep food scarce/expensive than give the food to those who need it for free. By doing so they create an artificial scarcity of food.
The largest example of artificial scarcity is the supply of money. Money is nothing more than metal/paper with fancy pictures on it, and has no intrinsic value accept what we give it. If we are experiencing financial problems we should either print more, or throw the entire concept of money in the garbage.
How morally bereft do you have to be to openly advocate the needless suffering/deaths of millions of people over the artificial scarcity of metal/paper with fancy pictures on it?
You cannot rely on private business to take care of society.
Private business is not for the people by the people. Private business is for the money by the company. Private business will take your money, and give you nothing in return whenever they can get away with it. See private health care for examples.
Huge government is great because as long as it is run properly it protects the people it represents from private business that will murder them for their money if they can get away with it.
http://www.progress.org/reform21.htm
All money is created out of nothing by a private banking cartel and then loaned into circulation at interest -- first by the Federal Reserve, via its purchase of government bonds; and second by commercial banks, via fractional reserve lending.
There are two critical problems with this process.
First, when the banking cartel loans money, only the principal gets created, not the interest. This is why the overall indebtedness of the economy is always several times greater than even the most liberal estimate of the money supply. Granted, if no one borrowed, there would be no interest to pay; but there would also be no money supply, and thus no economy.
Second, because all money is created as a loan, whenever the principal of a loan is paid back, the money supply is reduced by that amount.
Say, for instance, the money supply is currently zero. If a bank loans Person A and Person B $100 each and charges them 10% interest, the money supply increases to $200, yet total indebtedness increases to $220. As a result, the only way either one can pay the interest he owes is to capture a portion of the other person's loan principal through the process of commerce.
Thus, if Person A captures enough of Person B's loan principal to repay his loan plus interest, the money supply is reduced to $90. Of the $110 it receives from Person A, the only portion the bank can spend back into the economy is the $10 it receives as interest. Doing so increases the money supply to $100, leaving Person B with $10 of unpayable interest debt. At that point, the only way Person B can avoid bankruptcy is for someone else to obtain an interest-bearing loan from a bank, making it possible for Person B to capture the necessary portion of that someone else's loan principal to get out of debt.
So we see that, under our debt-based money system, interest can never truly be paid off, but can only be shifted from one person to another, or one sector of the economy to another (public to private, or vice versa). That more than anything else is what creates our dog-eat-dog, musical chairs economy -- an economy in which millions of people work frantically to capture other people's loan principal; and in which virtually everyone works (to one extent or another, and whether they realize it or not) as indentured servants to the banking elite.
The only way to fix this problem is to replace our debt-based money system with a debt-free money system. Under a debt-free money system, all new money would be spent into circulation interest-free instead of loaned into circulation at interest. This is just common sense. If the government can issue a dollar bond, it can issue a dollar bill. Both have the same backing. The only difference is that one bears interest, the other doesn’t; one serves the banking elite, the other serves the general public.
There are many ways to implement such a reform. The one I prefer is to peg the debt-free expansion of the U.S. money supply to the consumer price index (or something similar) -- that way, if the price level began to rise, the law would require (1) a moderate decrease in the percentage of government spending that comes from newly issued Treasury currency, and (2) a proportionate increase in the percentage that comes out of tax revenue. If the price level began to fall, the law would require the reverse.
As the resultant decrease in the public debt freed up an increasing percentage of the $200+ billion wasted every year on interest payments alone, and as the resultant boom in prosperity increased the tax base, tax revenues would soon exceed overall expenditures, thereby creating a real budget surplus (as opposed to the phony, "projected" surplus we heard so much about in the late '90s). At that point, adjustments to the growth-rate of the money supply could be made simply by adjusting the percentage of the surplus that is rebated to taxpayers. In other words, the rebate would go down if the price level went up, and up if the price level went down.
DEBT FREE MONEY NOW!