Supercommittee member, Senate Finance Committee Chairman Sen. Max Baucus, D-Mont., walks with reporters as he arrives to meet in the Capitol Hill office of Sen. John Kerry, D-Mass., and other Supercommittee members as time for action by the deficit reduction panel grows short, Monday, Nov. 21, 2011, on Capitol Hill in Washington. (AP Photo/J. Scott Applewhite)
Supercommittee member, Senate Finance Committee Chairman Sen. Max Baucus, D-Mont., walks with reporters as he arrives to meet in the Capitol Hill office of Sen. John Kerry, D-Mass., and other Supercommittee members as time for action by the deficit reduction panel grows short, Monday, Nov. 21, 2011, on Capitol Hill in Washington. (AP Photo/J. Scott Applewhite)
FILE - In this Nov. 22, 2011 file photo, President Barack Obama gestures while speaking at Central High School in Manchester, N.H. The failure of Congress' supercommittee adds a new dimension to the 2012 political contests by drawing political battle lines around broad tax increases and massive spending cuts that are now scheduled to begin automatically in 2013. (AP Photo/Charles Krupa, File)
Supercommittee member Sen. John Kerry, D-Mass., walks amid reporters as the deficit reduction panel ends in failure, on Capitol Hill in Washington, Monday, Nov. 21, 2011. (AP Photo/J. Scott Applewhite)
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The failure of Congress' deficit-cutting supercommittee may be a bad omen, but it's no calamity.
Just ask the bond market, which is still willing to lend Uncle Sam money for 10 years at just under 2 percent. If the supercommittee's functioning had really been important to the nation's future solvency, bond yields would have skyrocketed as they have in Greece and Italy and much of Europe.
Instead, U.S. borrowing rates got a bit cheaper after the committee admitted that it had no cape, no phone booth and no super powers to achieve $1.2 trillion in deficit cuts by last week's deadline.
Washington University economist Murray Weidenbaum, a veteran of Washington budget battles back when he advised President Ronald Reagan, wasn't surprised by the outcome. He predicted weeks ago that the committee's work would end in failure.
"Neither side even thought about serious negotiations," Weidenbaum said. "It was all about how you bash down the other side."
The failure may have been a major development in the dysfunctional world of Washington politics, but it was mostly a nonevent for the economy. Since the committee couldn't agree, the law requires $1.2 trillion of automatic spending cuts, starting in 2013 and spread across a wide range of federal programs.
Noises are already being made about delaying those cuts, or at least the portion that would affect the military. If the economy remains weak throughout 2012, a delay might be wise: "This is not a propitious time to tighten fiscal policy," Weidenbaum says.
Meanwhile, though, Congress faces other important deadlines. Extended unemployment benefits and a temporary payroll tax cut both expire at year's end, and Democrats would like to extend them. Republicans will probably insist on offsetting them with other spending cuts.
Also due on Jan. 1 is a Medicare fee cut that's unpopular with doctors. Congress has been overriding it year after year but keeping it on the books in order to count the savings in future years.
Over the next month, then, we can expect a replay of the supercommittee debate, with Democrats and Republicans swapping proposals for tax increases and spending cuts, while mostly talking past each other.
Partisan positions will harden as next year's campaign heats up, so serious deficit reduction probably will wait until a lame-duck session after the election. And that session will be looking at two large pieces of fiscal drag looming at the beginning of 2013: The automatic spending reductions and the expiration of the Bush-era tax cuts.
If the economy is as weak next November as it is now, the temptation will be to push the austerity measures back by another year or two. It's easiest to kick the can down the road, as they say in Washington.
The trouble is that the road is a dead end. The spiraling costs of federal programs, especially Medicare, mean that if nothing is done, our debt picture will someday look a lot like Italy's.
Eventually, the bond market will run out of patience. We don't know when that will be — the U.S., with a currency that's widely accepted, has more leeway than Greece, which doesn't even have its own currency — but if we wait too long, the results will be ugly.
Then, we'll look back at the supercommittee episode of 2011 and wonder why everybody was so short-sighted.
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