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Supercommittee Going Gimmicky, Markets Set to Panic?

by Brandon Greife / /

Shot: In an op-ed for Politico, Moody’s chief economist MarkZandi, explainsthe potential disaster that lays ahead if the Deficit Supercommittee relies onbudget gimmicks to achieve its deficit target.

“On the darkest path, the committee relies on budgetgimmicks – like an assumed winding down of the Iraq and Afghanistan wars – to achieveits $1.2 trillion goal in 10-year deficit reduction. The panel could then avoidsubstantive government spending cuts similar in size to those that wouldautomatically occur beginning in 2013.

Using gimmickry would signal financial markets that it ishopeless to believe Washington can address the nation’s long-term fiscalproblems. . . Financial markets would be thrown into turmoil, upending thealready shell-shocked collective psyche. The economy would descend back intorecession . . .”

Chaser: In a story entitled, “Gimmicks Could Help RescueDeficit Talks,” the Wall Street Journal reportsthat it is looking increasingly likely that budgetary sleight-of-hand will beused in any bipartisan deal.

“With Congress’s deficit-reduction supercommittee barrelingtoward a deadline for striking a big budget deal, both parties are reaching foraccounting gimmicks to help reach their target of $1.2 trillion in savings over10 years.

Some tools are familiar to old Washington hands, such asmassaging budget assumptions and painting rosy economic scenarios. Othersinclude taking credit for “saving” money on wars that are ending and puttingoff until next year what lawmakers don’t want to deal with now.”

Bottom line: Unless Congress gets serious about the need forreal deficit reduction to ease jittery markets, Americans should brace for awicked hangover.