Extending Our Credit Line

Now that the Super Committee has failed, it is worth considering the conspicuous absence of the president from debt discussion. It’s not a new pattern, indeed, as former Clinton chief-of-staff Erskine Bowles noted, Obama took a pass at mentioning his own fiscal commission because the politics just didn’t make it palatable. It seems that sentiment remains prevalent at 1600 Pennsylvania Avenue, and is part of what Politico describes as a “remarkably disciplined campaign by the White House to keep him as removed as possible from what aides viewed as a doomed process.” Sure, makes sense, governing is tricky after all, why bother? 

I’m going to go out on a limb, but I doubt that when a newly sworn president first takes a seat behind the Resolute Desk, he (or she) probably should not expect to find a presidential owner’s manual in one of the drawers.

But let’s say there really was one and imagine how it might have informed our current president as the Super Committee looked poised to fail.

Let’s flip to the chapter describing what do in case we were staring down the barrel of fiscal crisis. Now let’s look up the section that deals with what a president should do if Congress predictably punts the tough budget decisions to a temporary, ad-hoc authority that is supposed to go into seclusion, pop white smoke, and emerge with a plan. Now let’s thumb down to the heading that deals with what a president should do if it looked like this body was going to fail.

Here’s what it probably wouldn’t say: Go to Hawaii, Australia and Bali.

Europe is still enmeshed in its sovereign debt challenges that have credit markets in flux, and as we now know, the U.S. was poised to have a marker-moving day when the Super Committee fizzled. And where was the president? Basically on what would be anyone’s dream honeymoon.

The United States has already seen one credit rating agency downgrade U.S. sovereign debt. But while the Treasury remains a safer bet than other sovereigns for now and the dollar remains the world’s currency, the down-grade has amounted to little more than a news release. It should be a warning sign.

In the absence of fundamental reforms to our major entitlement programs, no sequester, no defense cuts, no tax plan will adequately alter our fiscal trajectory. Our nation is getting older, and it is getting more expensive to support retirees. But our entitlement programs for future generations have not been reformed to acknowledge that reality. That would require an expenditure of political capital to achieve a meaningful reform. The Super Committee was designed to minimize, but not eliminate that requirement.

Now that the Super Committee has failed to produce recommendations to reduce the deficit by $1.2 trillion over ten years – for context, that is less than last year’s annual deficit of $1.3 trillion – annual sequesters are scheduled to kick-in to reduce spending to specified levels. Half of these cuts would fall on defense, while the rest would be spread out over the rest of the non-defense budget. Social Security and Medicaid – 28 percent of all spending in 2010 – are exempted. Medicare is also largely spared, with a sequester limited to no more than 2 percent for most related spending.

The most what distinguishes the sequester from a meaningful deficit reduction plan is that it leaves basic entitlements unchanged. Even the de minimis 2 percent sequester applied to Medicare contemplated by the Budget Control Act doesn’t actually address financing and benefits. A sequester would leave intact all of the major drivers of our debt problem.

It was designed that way. No one would have voted for the Budget Control Act if it entertained the prospect of automatic cuts to current seniors. Cynicism aside, the Act was structured to allow real reforms to originate in the Super Committee, and put in place a mechanism for making those reforms easier to pass. Recommendations emanating from the Super Committee would have received privileged and expedited consideration in Congress. It meant fewer members of Congress would have had to take tough votes on what would have necessarily been a package of less than politically palatable policy changes. But to get that far, the recommendations would have needed to make it out of the Super Committee. Seasoned politicians all, no member of the Committee was going make a move without cover. And that’s where the president was needed.

Republicans demonstrated a willingness to depart from orthodoxy on revenue if Democrats were willing to give on major spending programs. And, as we have seen, no Democrat with their eye on another term in office was going to make that leap without their party leader’s blessing.

Unfortunately, these machinations just weren’t convenient for a president gearing up for a general election. So forget the presidential playbook. It seems the president is running the political one, and we know that one actually exists. What do you think it says to do when you’ve got a massive debt problem and a Super Committee that was teetering on eventual failure?

I don’t know, but I hear Bali is nice this time of year.