Itís now less than a month before the Joint Committee on Deficit Reduction ó the group that more typically is inappropriately referred to as the super committee ó is supposed to report its recommended $1.2 trillion to $1.5 trillion deficit reduction plan to the House and Senate.
In reality, the time for the committee to act is even shorter than that because it needs to send its plan to the Congressional Budget Office for scoring well before the Nov. 23 deadline.
What happens if, as I and many others increasingly suspect, the super committee isnít able to agree to a deficit reduction plan, if the plan it agrees to is substantially less than whatís required ($400 billion is the number being mentioned most often these days) or if ó also as I and many believe ó the full House and Senate are unable to pass whatís recommended?
Would it really be a political and financial catastrophe, the equivalent of a nuclear bomb, typhoon, tsunami and magnitude-10 earthquake all rolled into one? Would political hell and damnation result as voters unleash unmitigated anger toward elected officials at levels and in ways that have seldom before been seen in American history? Will the economy actually suffer immediately as the last, best and current hope for serious deficit reduction goes down the drain. And will Wall Street immediately react negatively if the super committee process fails?
Thank you for that brief moment of frivolity. I needed that.
Start with voters. Does anyone really think that the reaction to a super committee failure will be any different than what it has been when, as has happened repeatedly during the past decade, the House and Senate havenít agreed to a budget resolution or appropriations havenít been enacted by the start of the fiscal year? Is the reaction going to be all that different from the relatively ho-hum response to the repeated threats of a government shutdown or a financial meltdown because continuing resolutions and debt ceilings have been taken hostage?
On top of everything else, given what has now become a steady series of disappointments over breakdowns in the policymaking process in Washington and the obvious unwillingness of some in Congress to compromise on spending, revenues, deficits and national debt, why does anyone think that many voters will be all that surprised if the super committee process doesnít deliver the goods?
The same is true of capital markets óyou know, the ones that these days react more to forecasts of what will occur than what actually happens. The analyses Iíve read and the people Iíve spoken with have convinced me that Wall Street isnít assuming that the super committee process will accomplish much of anything. Indeed, given the pessimism I hear from the street, financial analysts and investors will be far more surprised if the super committee recommends $1.2 trillion or more in deficit reductions that are enacted than if the process accomplishes nothing.