So, the Supercommittee Fails. What Happens Next?

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J. Scott Applewhite / AP

Supercommittee Co-Chair Sen. Patty Murray of Washington updates reporters as she and other Democratic members of the Supercommittee arrive for a closed-door meeting in Washington, Nov. 17, 2011.

Every morning that it’s in session, the Senate opens with a prayer from Chaplain Barry C. Black. Black usually asks God to look out for the chamber and to guide its members. He rarely ventures into the politics or policy specifics of the moment. But on Thursday morning, Black offered up an unusual supplication. “Eradicate false ambition as you make them content to serve you where they are and as they are. In a special way, guide the supercommittee in its challenging work,” he said. Boy, do they need the help.

As the window of opportunity to do something big has passed – the Congressional Budget Office really needed to see language for a big bill by Thursday evening in order to score it by the Monday deadline – lawmakers spent more time figuring out how to blame one another than what to do next. But, it’s now worth asking: If they can’t find $1.2 trillion in savings, what happens next?

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The ultimate consequence would be something called sequestration – a n across the board cut of $1.2 trillion split between entitlements, non-defense discretionary spending, and the Pentagon, which would take place in January 2013. That date was purposefully set a ways into the future to give lawmakers some time to figure out a way around it in case the committee should fail. So, what are the Plans B, C, D, E and F? Here’s a look at the possibilities:

B)  The supercommittee punts. Its members agree to a small number of cuts and revenue increases up front, but then instructs the relevant committees in each chamber to spend the next year figuring out how to come up with the rest of the savings. This is looking less and less likely as these instructions are fairly complicated and nobody seems to be able to agree on the language – language that would have to garner support in both chambers once out of committee. Also, there’s a big question if House Republicans, particularly the freshmen, would accept a two-vote process.

C) The committee agrees to a smaller package of bipartisan cuts and revenue increases – say $400 billion in deficit reduction. This would at least alleviate some of the pain of the sequestration — instead of lopping off $600 billion from the Pentagon budget, it’d only be $400 billion, a lot but in the grand scheme of things more manageable. I’m not sure it would inspire much market confidence, but something’s better than nothing, I suppose.

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D)  This package was meant to be the vehicle for a lot of remaining congressional business for the year, from an Alternative Minimum Tax patch to a fix on Medicare fees paid to doctors to unemployment insurance and President Obama’s payroll tax breaks. Since the committee’s product is privileged – meaning filibuster-proof — the committee could pass a bill wrapping up other leftover legislative business. Democrats would like to see some of Obama’s jobs agenda folded into this, and Republicans are interested in the AMT fix and doctor’s fees. All of it would be offset using savings counted from winding down the wars in Iraq and Afghanistan. But there are problems with this scenario: Many Republicans call these war savings gimmicky — akin to counting money never spent — and have thus far not been willing to accept its use. Only passing these extras would also do nothing for deficit reduction.

E)  Negotiators fail to reach an agreement on even a small package and both sides introduce their own bills, which are scored and voted on by the committee in turn. Neither succeeds in breaking the deadlock, and at some point in 2012, lawmakers find a way to avoid the sequestration either by enacting tax reform or repealing the sequestration or some combination.

F) Negotiators fail to reach an agreement on even a small package. On Monday night, after U.S. markets close and after both sides hold outraged press conferences blaming each other for failure, supercommittee members slink out of town, joining their colleagues for Thanksgiving break. (Both chambers were set to adjourn this week for Thanksgiving vacation.) The committee hopes no one, especially Wall Street and the ratings agencies, notices. Some time in 2012, lawmakers find a way to avoid the sequestration either by enacting tax reform or repealing the sequestration or some combination.

Sadly, I think F is currently the most likely.