Foodservice Equipment Reports

What If The Congressional “Super Committee” Fails?

As we go to press this week, it appears the Congressional Joint Select Committee on Deficit Reduction, the so-called “Super Committee,” will fail to come up with a way to trim the federal deficit over the next 10 years. The joint committee was created back in August after the debt ceiling crisis that eventually led Standard & Poor’s to downgrade U.S. government debt. Part of the law creating the committee includes automatic cuts of $1.2 trillion, half from defense, half from discretionary domestic spending excluding Social Security and Medicare, if the committee fails to reach a deal.

So what happens if they can’t come to any agreement? FER and our forecasting partner John Muldowney, v.p.-marketing at Alto Shaam, have held off an E&S forecast revision in part to make sure that the markets, consumers and business in general don’t retrench even more, as happened after the August debacle.

But it now appears very little will in fact happen if the committee fails to do anything. Most observers believe the markets have already factored in a failure. Consumers already believe Congress is totally dysfunctional. And none of the automatic cuts kick in until 2013, after the next Presidential and Congressional elections. So why not kick the can down the road again? The markets (and the politicians, both Democrats and Republicans) also know that unless Congress acts, the Bush-era tax cuts automatically expire in a year. That would cut the deficit by more than $7 billion over the next 10 years. So, in other words, never mind.

Of more concern and likely to have a more direct effect on foodservice and E&S are pending extensions of federal unemployment benefits and last year’s cuts in payroll taxes. Failure to get these programs extended will take significant money out of the American economy Stay tuned.