A year ago this month, Standard and Poor’s fired a shot across America’s bow, downgrading the nation’s coveted AAA rating to a AA-plus. S&P’s rationale for the cut was that Congress’s Budget Control Act “fell short of the amount … necessary to stabilize the general government debt burden by the middle of the decade.”
For several weeks, media pundits and Washington policy-makers were jolted out of denial about the assumption that deficit spending could continue in the same trajectory. Congress formed the Joint Select Committee on Deficit Reduction – aka the Supercomittee – as part of the Budget Control Act. Its mandate was to make recommendations within three months to reduce federal expenditures over 10 years by at least an additional $1.5 trillion on top of the $917 billion already agreed to – for a total reduction of $2.4 trillion.
Three months passed without agreement by the Supercommittee on any spending cuts. The sense of urgency dissipated, and an historic opportunity to bring measurable and real discipline to spending was lost. Meanwhile, the federal government entered its fourth-straight year projecting a $1.25 trillion deficit without a plan or a budget. In the preceding three years of the Obama administration, the annual deficit averaged $1.34 trillion. Previously, in any single year in U.S. history, the worst deficit had been $459 billion.