Debt failure likely to punt decisions to '12 lame-duck Congress

Debt failure likely to punt decisions to '12 lame-duck Congress

The supercommittee’s failure is widely expected to punt critical decisions on taxes and spending to the lame-duck Congress in December 2012, which could end up being one of the busiest ever.

At the top of the list are the Bush tax rates now set to expire at the end of the next year.

Efforts to cancel or mitigate the $1.2 trillion in automatic cuts triggered by the failure may also be decided in the lame-duck.

Those cuts, scheduled for January 2013, include $600 billion in cuts to defense spending. Republicans in particular are desperate to avoid slashing national security budgets, which the defense secretary and House Armed Services Committee chairman say would devastate the military.

Congress could act well before the lame-duck, but the chances of that, with the campaign season heating up, are unlikely, budget and defense experts as well as political analysts said.

“It now seems likely that major progress on the deficit reduction will not occur until after the upcoming presidential election, with both parties viewing the election as a referendum on the mix of taxes and spending,” said Joel Prakken of Macroeconomic advisers.

Already this year several efforts at reaching a grand bargain on taxes and spending have failed, including a joint effort by President Obama and Speaker John BoehnerJohn BoehnerJuan Williams: GOP fumbles on healthcare The Hill's 12:30 Report The new dealmaking in Congress reveals an old truth: majority wins MORE (R-Ohio). 

 “I think it all gets pushed back into 2012 lame duck session,” Steve Bell of the Bipartisan Policy Center said.

Steve Ellis of Taxpayers for Common Sense argues it is “really cynical to think they are not going to do anything for a year.”

That said, Ellis sees little chance of an earlier deal.

“I think it is going to be really hard to get anything done,” he said.

Some defense policy experts expressed certainty Tuesday that the defense cuts will be voided, given opposition from Republicans and Defense Secretary Leon Panetta.

“But not until after the election, when voters give one party enough control to actually get it done,” said Loren Thompson of the Lexington Institute. “This Congress has shown time and again it is unable to do anything before the last minute.”

A campaign season in which both sides believe they can go on offense will make it worse.

Given the rocky economy, Republicans believe the White House is within their grasp, and a difficult battleground for Senate Democrats defending 23 seats means the GOP also has a great chance of winning the Senate.

Republicans appear likely to hold on to the House, but Democratic Leader Nancy Pelosi (Calif.) has expressed confidence she will be Speaker again. And if Obama runs strong, his coattails could usher in a Democratic House.

Bill Hoagland, a former Senate GOP budget aide, said this kind of intense campaign season will make it difficult for Congress and the president to make tough decisions next year.

“Some of us think this is so important and are so upset that the joint select committee failed, we are not going to give up,” Hoagland said. “We will continue to look for those tools. The biggest problem will be that we have moved into an election season.”

Hoagland predicted the bipartisan Gang of Six and its supporters, which pushed for a compromise on reducing the deficit, will try to get a budget resolution approved next year.

If the House and Senate can reconcile competing budget resolutions, it could become the vehicle for making deficit cuts, extending tax rates and avoiding the sequester, he suggested.

This would be a difficult political compromise to engineer, but if it succeeds, a reconciliation bill only requires a simple majority to pass the Senate.

While most analysts are pessimistic anything will happen before the lame-duck session, a few hold out alternative scenarios.

Dov Zakheim, Pentagon comptroller under President George W. Bush, said the best time for GOP hawks to push legislation that would undo the military cuts “would be over the summer.”

“With the election only a few months away, would the president feel he could veto it?” Zakheim said.

Obama could also be pressured by his GOP rivals, said Ron Bonjean, a former adviser to former House Speaker Dennis Hastert (R-Ill.). Mitt Romney, who is leading the race for the GOP presidential nomination, has said he would cancel out the defense cuts. Might Obama look for a deal to take the question of defense cuts off the table in November?

White House press secretary Jay Carney underlined Obama’s veto threat on Tuesday, telling reporters aboard Air Force One it includes no “wiggle room.”

Still, Thompson expects “several failed attempts to void” the defense cuts next year.

“The lone way to get it done before the election would be to attach it to a must-pass bill like a highway transportation bill — you want those potholes fixed, then you better give us this.”