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Financial Planning > College Planning > Student Loan Debt

Deficit Reduction Committee Gets to Work

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Congress’ solution to the debt limit crisis and rising deficits is fully operational, but many are left wondering whether the bipartisan Joint Select Committee on Deficit Reduction is capable of fulfilling its mandate when Congress as a whole couldn’t make the hard decisions that were necessary for a long-term solution.

And the Deficit Reduction Committee is even more susceptible to deadlock than the full Congress since the committee is populated by six Republicans and six Democrats. The committee was the end result of months of negotiations between Democrats and Republicans during the debt limit debates. The resulting compromise included $917 billion in discretionary spending cuts over 10 years. The committee must come up with another $1.2 trillion to $1.5 trillion in cuts.

The committee must pass a deficit reduction plan by a simple majority vote (seven out of 12). The plan will then go to Congress for a vote. If the committee fails to reach a compromise proposal or Congress does not adopt the committee’s proposals, a series of sharp automatic cuts will kick in, slashing budgets across the entire federal government, including at the Defense Department.

The committee can fulfill its deficit reduction mandate by cutting spending, but tax increases have not been taken off the table.

House and Senate leaders made standard partisan picks for the committee. Senate majority leader Harry Reid, D-Nev., appointed three Democratic senators to sit on the committee, including Senate Democratic Conference Secretary Patty Murray, D-Wash.; Senate Finance Committee Chairman Max Baucus, D-Mont.; and Senate Foreign Relations Committee Chairman John Kerry, D-Mass.

Speaker John Boehner, R-Ohio, also had three picks; he chose Rep. Jeb Hensarling, R-Texas; and Michigan Reps. David Camp and Fred Upton. Senate Minority Leader Mitch McConnell, R-Ky., chose Sens. Jon Kyl, R-Ariz.; Pat Toomey, R-Pa.; and Rob Portman, R-Ohio. House Minority Leader Nancy Pelosi, D-Calif., named Reps. Jim Clyburn, D-S.C.; Chris Van Hollen, D-Md.; and Xavier Becerra, D-Calif., to the committee.

Despite Republican resistance to compromise on tax increases, Boehner sounds confident about the committee’s prospects for agreement, saying that the “debt and deficits are a threat to our economy, and America cannot achieve long-term job growth until we take action to address this crisis … a serious, bipartisan committee of lawmakers will begin the hard but necessary work of making the tough choices needed to rein in mandatory and entitlement spending, which are the drivers of our debt.”

But some commentators are questioning the impartiality of committee members who they believe are beholden to the outside interests. USA Today is reporting that the 12 members of the committee have received an aggregate $65 million from PACs. The top donors were lawyers and law firms, which contributed $31.5 million. Another $11.2 million was donated by the securities and investment industry. Other top donors include health professionals, real estate industry, and liberal/Democratic donor organizations.

Despite concerns about the motivations of committee members, Reed says he believes it can forge a mutually agreeable (or disagreeable) compromise. “The Joint Select Committee has been charged with forging the balanced, bipartisan approach to deficit reduction that the American people, the markets and rating agencies like Standard & Poor’s are demanding.”

For additional coverage of this issue and similar ones, we invite you to sign up with AdvisorOne’s partner, AdvisorFX, for a free trial.

See also The Law Professor’s blog at AdvisorFYI.


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