During the past year, I’ve often used this space to warn of the dangers of FINRA (the self-regulatory organization for broker-dealers) extending its jurisdiction to investment advisory firms. While I will most certainly return to that extremely important subject (the House Financial Services Committee is expected to take up a bill on an SRO for advisors very soon), in this post I would like to focus on the so-called “supercommittee” that will provide us with the next round of political-football-with-real-world consequences.
Here are a few questions—and answers—about the Super Committee:
Q: How is the Supercommittee structured?
A: There are 12 members of Congress on the committee: three members each were appointed by the Speaker (Rep. Boehner) and Minority Leader (Rep. Pelosi) of the House and three members each were appointed by the Majority Leader (Sen. Reid) and Minority Leader (Sen. McConnell) of the Senate.
Q: Who serves on the Super Committee?
A: Sen. Patty Murray (D-Wash.) co-chairs the committee. Other Democratic Senators are Max Baucus (D-Mont.) and John Kerry (D-Mass.). The Republican Senators are Jon Kyl (R-Ariz.), Rob Portman (R-Ohio), and Pat Toomey (R-Penn.). Rep. Jeb Hensarling (R-Tex.) co-chairs the committee. Other House Republicans are Fred Upton (R-Mich.) and Dave Camp (R-Mich.). House Democrats are Xavier Becerra (D-Calif.), Jim Clyburn (D-S.C.), and Chris Van Hollen (D-Md.).
Q: What is the mission of the supercommittee?
A: The Joint Select Committee on Deficit Reduction—established by an act of Congress on August 2, 2011 (the same law that ended the debt-ceiling crisis)—is charged with identifying $1.2 trillion to $1.5 trillion in deficit reduction steps.
Q: What is the deadline for action by the supercommittee?
A: The day before Thanksgiving—Nov. 23—is D-Day for the supercommittee (actually, the committee needs to have its recommendations submitted to the Congressional Budget Office on Monday, Nov. 21, so CBO can “score” them before the House and the Senate vote on them).
Q: What happens after the committee issues recommendations?
A: The committee’s recommendations will be put to a simple up or down vote by Congress by Dec. 23, 2011 (no amendments in either the House or the Senate and no Senate filibusters).
Q: What happens if the supercommittee is unable to agree on recommendations or if Congress fails to approve the committee’s recommendations?
A A trigger mechanism would enact $1.2 trillion in automatic spending cuts (called “sequestration” in Washington budget-speak), divided equally between defense and non-defense discretionary programs. However, there are some exceptions. Programs excluded from the automatic cuts include Social Security, Medicaid, and veterans’ benefits. In addition, the spending cuts would not go into effect until FFY 2013, thereby punting the pain until after the 2012 election. It’s also possible that the committee may come up with a partial deal that falls short of $1.2 trillion, in which case the automatic cuts would make up the difference between $1.2 trillion and whatever cuts are approved by Congress.
Q: Could Congress change the law that established the supercommittee?
The question everyone is asking is whether the supercommittee will be able to reach an agreement. The jury is definitely out. Some commentators have predicted that a partial deal is the most likely. A few brave souls still hold out for some “grand bargain” that would go well beyond $1.5 trillion in deficit reduction. In a town where there are no secrets, the supercommittee has basically kept its deliberations private. During the last few days, a few tidbits have leaked, which only verified that the Democrats are pushing for revenue increases (probably via a tax on millionaires) and that Republicans are supporting spending cuts without revenue increases.