WASHINGTON, D.C. – November 14, 2011 – (RealEstateRama) — With the November 23, 2011 legal deadline looming, the Congressional Super Committee focused on deficit reduction may be inching a little closer to an agreement. The Republicans and Democrats on the Super Committee recently presented alternative proposals which appear to have been more for public consumption and political advantage than for true deal making.
The plan advanced by the Democrats included over $1 trillion in new revenues as part of a $3 trillion deficit reduction package. In their own $2.2 trillion deficit reduction plan, Republicans proposed new fees and Medicare co pays, but they did not include tax increases. It appears, however, that the Republicans on the Super Committee may agree to close some tax loopholes in a new proposal they are submitting to the Democrats. There are reports that the Republicans may agree to about $50 billion in unspecified cuts to corporations. If that is the case, it is possible that tax expenditures, such as the Low Income Housing Tax Credit (Housing Credit), may be in play.
The odds are still long for an agreement that reaches the $1.2 trillion threshold which would prevent an automatic sequester of defense and non-defense spending in 2013. Many in the Democratic Caucus in the House believe a sequester would be preferable to an agreement that cuts the deficit by $1.2 trillion because they fear that such an agreement would include some cuts in entitlements. Republicans appear very concerned with the prospect of automatic cuts in defense spending that would take place if the $1.2 trillion threshold is not attained, and this fear may push them toward an agreement.
Some believe that the Super Committee could be motivated to take action because they do not want to risk a further reduction in US credit ratings. However, one credit rating agency recently downplayed a reduction based solely on Super Committee inaction and stated that such a development would only be one factor. The rating agency also pointed to the fact that $1.2 trillion will be cut one way or the other, whether in the Super Committee or by automatic sequester.
Low ratings for Congress could also prompt the Super Committee to act in the name of incumbent preservation. To be sure, polls show that the public’s favorable ratings for Conges are in the mid-teens. Those same polls show, however, that the public overwhelmingly is against cuts to entitlements. Since both political parties read the polls, cutting entitlements is not likely to be part of a Super Committee agreement even though most experts agree that major entitlement reforms must take place to secure deficit reduction over the long term. Accordingly, conventional wisdom continues to hold that the Super Committee will agree to about $500 billion in cuts to discretionary spending that were identified last summer in a bipartisan group led by Vice President Biden. That would leave $700 billion to be sequestered.
While the Super Committee continues to meet, the clock is also ticking for many tax expenditures which are due to expire at the end of this year. Talk of the need for an extenders bill is beginning to pick up. Such a bill would likely be rolled into a bill that would include an extension of payroll tax relief enacted a year ago and also due to expire. The extension is one part of the Administration’s jobs program that enjoys broad bipartisan support. Such a multifaceted tax bill is the likely place to include legislation about to be introduced in the Senate and in the House that would extend and make permanent the 9 percent Credit rate and fix and make permanent the 4 percent Credit rate for allocated Credits. We continue to meet with Senate cosponsors Senator Maria Cantwell (D-WA) and Senator Olympia Snowe (R-ME) and House cosponsors Cong. Pat Tiberi (R-OH) and Cong. Richard Neal (D-MA) in order to line up further cosponsors for the legislation.
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