The Congressional SuperCommittee set up as part of last summer's debt ceiling agreement has the power to right the America 's finances. It is due to report on 23 November. So far members have been extraordinarily tight-lipped as to progress.
Six Democrats and six Republicans sit on the committee. Not all of them are known to be eager to do a deal.
If they fail to agree to measures that close deficits over the next 10 years by $1.2 trillion, then automatic spending cuts take effect that are projected to do the same. Those cuts leave Social Security unscathed and hit Defense hard.
If the SuperCommittee fails to come to any agreement, expect confidence in the US to deteriorate rapidly. Falling stock prices are distinct possibilities. The Fed may see its ability to suppress higher interests fade, with growth stopping impact. Alice Rivlin, former Clinton budget director, says, "I think we may be facing a double dip recession".
On the other hand, if the SuperCommittee succeeds in a "Go Big" deal of $4 trillion in 10 year deficit reduction, expect a surge of near euphoria. Stocks could rebound marvelously and justifiably. Confidence would strengthened across the globe.
More likely, than outright failure or clear success, however, the SuperCommittee will do just enough to get by. It'll squeak out $1.2 or $1.5 trillion in deficit reduction. It'll not reform entitlements or taxes in any meaningful way.
Economic queasiness will continue to reign - until the next financial squall.
Related Resources:
http://crfb.org/document/going-big-could-improve-chances-success
http://www.thefiscaltimes.com/Articles/2011/10/16/Super-Committee-Battles-Deadlines-and-Doubts.aspx#page1
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