The so-called “Super Committee”, charged with first agreeing on and then proposing deficit reductions of at least $1.5 trillion in a matter of a few weeks, is being lobbied to Go Big by the Committee for a Responsible Federal Budget, an offshoot of the New America Foundation, a non-partisan think tank. The gist of their argument is that the American fiscal situation and pending debt crisis is the most predictable disaster in history. They also believe solving this problem will require a minimum of $4 trillion in deficit reduction over the next 10 years. Furthermore they believe that the “Super Committee” has a unique opportunity to go big by taking advantage of the work already done by the Simpson-Bowles deficit reduction committee and adopting their proposal.
Given the short time frame the committee has been given to agree on a resolution and the magnitude of the pending crisis I think this is the right course. David Cote, the CEO of Honeywell and Simpson-Bowles member, put it this way,“We all know this will get resolved and it will get resolved in one of two ways. One, is we can do it now thoughtfully and proactively the way grownups do things. The other way is to wait until it gets to a point the bond market decides they don’t trust you anymore.” The latter will result in an escalation of interest rates not only for government borrowing but mortgages, vehicle loans and credit cards which will create a huge drag on the economy.