The Debt Super Committee – the Joint Select Committee on Deficit Reduction – has been established to create a plan before Thanksgiving to cut $1.5 trillion in federal spending over the next decade. If the Committee fails there will be an automatic $1.2 trillion in cuts to defense and discretionary spending. While this pressure is significant for the committee members and Congress as a whole, the likelihood of success for this Committee in coming up with a workable plan is unknown.

Most Democrats favor a combination of tax increases for corporations and the wealthiest Americans combined with a reduction in spending. Republicans, on the other hand, oppose any tax increases. “Since all six of the Republican appointees to the Joint Select Committee on Deficit Reduction have pledged to Grover Norquist’s Americans for Tax Reform [a conservative advocacy group] not to raise taxes under any circumstances, the only agreement on solving the nation’s debt crisis that can emerge from the committee will necessarily be the kind of “compromise” that emerged from Congress’s last effort: all cuts and no revenues.”[1]

Because of the intransigence of both parties in the negotiations on the issue of tax increases, it is unclear if the Supercommittee can get done what the full House and Senate could not do. Yet there are some questions as to whether any moderate Republicans might consider raising taxes, a stumbling block for compromise between the parties as a way to get meaningful debt reduction done before the holidays.

A key question is whether the Supercommittee as a whole can agree on tax increases, mainly on the incomes of the richest Americans and for corporations. This paper looks at this question from the perspective of the self-interest of each of the committee members and how each of them would consider increasing taxes as part of their budget recommendations.

Using a game theory model, I have calculated an outcome based on an assessment of the twelve Senators and Congressmen on the Supercommittee. Both political parties are equally represented on the committee and both houses of Congress have equal representation. The following is an assessment of the twelve committee members, looking at their respective positions, influence and salience with respect to tax increases.

My initial assessment is that the Supercommittee will not make any recommendations to raise taxes for the rich and for corporations as part of its budget recommendations to the full House and Senate.

As the Table 1 suggests, the likelihood that the Supercommittee will recommend raising taxes for the rich and for corporations remains small, with a probability of less than 1 in 4.

 

Table 1[2]

	Position	Influence	Salience		P*I*S	I*S
Rep. Jim Clyburn (D-S.C.)	90	35	90	283500		3150
Rep. Xavier Becerra (D-Calif.)	75	40	90	270000		3600
Rep. Chris Van Hollen (D-Md.)	49	40	50	98250		2000
Sen. Max Baucus (D-Mont.)	50	95	50	241756		4750
Sen. John Kerry (D-Mass.)	50	55	50	137500		2750
Sen. Patty Murray (D-Wash.)	35	30	90	94500		2700
Sen. Jon Kyl (R-Ariz.)	0	85	100	0		8500
Sen. Pat Toomey (R-Pa.)	0	30	100	0		3000
Sen. Rob Portman (R-Ohio)	0	93	100	0		9300
Rep. Jeb Hensarling (R-Texas)	0	31	100	0		3189
Rep. Dave Camp (R-Mich.)	0	55	100	0		5500
Rep. Fred Upton (R-Mich.)	0	37	100	0		3712
			Sums:	1125507.17		52151
				Weighted Mean:		21.58

But is there any scenario that would increase the likelihood that tax increases for corporations and wealthy Americans occur?

Maybe.

To understand these scores, it’s worth looking at the background of the committee members, their voting records, constituent bases and financial support to see how this might change the outcome on this question.

As noted earlier, the Supercommittee is composed of an equal number of Senators and Congressmen as well as an equal number of Republicans and Democrats.

Rep. Jim Clyburn (D-S.C.)

The assistant leader to House Minority Leader Nancy Pelosi, (D-Calif.), a new position she created for him when the Democrats lost the majority in the House, served as majority whip when Pelosi was Speaker. His top career donors, according to the Center for Responsive Politics, include the United Parcel Service, AT&T, the trial lawyer trade group American Association for Justice, and two labor unions, the International Association of Machinists and Aerospace Workers and the American Federation of State, County and Municipal Employees.[3]

His Congressional district voter partisanship score (PVI)[4] is +D12, which makes him relatively immune to partisan electoral pressure. Looking back over his voting record for the last 18 years, his party-line voting record is almost 100%, suggesting an almost unwavering Democratic party voting position. However, his influence on the Hill is considered low relative to other Democrats in the House of representatives.

Rep. Xavier Becerra (D-Calif.)

First elected in 1992, Rep. Becerra is vice chair of the Democratic Caucus and the ranking member of the House Ways and Means Subcommittee on Social Security. Like Sen. Max Baucus, )(D-Mont.), and Rep. Jeb Hensarling, (R-Texas), Rep. Becerra served on the National Commission on Fiscal Responsibility and Reform, better known as the Bowles-Simpson Commission, that was charged with developing a plan to deal with the nation’s long term debt. His biggest career donors are the American Association for Justice, the United Parcel Service, two unions–the United Auto Workers and the United Food and Commercial Workers–and a second professional organization, the American Society of Anesthesiologists. These relationships speak to his concerns about ordinary citizens vis-à-vis corporate interests.[5]

His Congressional district is heavily Democrat, giving him the highest state voter partisanship score (PVI)[6] of +D29. Though his voting record is in line with his party’s positions, his overall partisan voting record is lower than his colleague, Rep. Clyburn, it still remains high with an average party line voting pattern falling in the mid-90% range since 1993.

Rep. Chris Van Hollen (D-Md.)

First elected in 2002, Rep. Van Hollen quickly rose in his party’s ranks. In 2006, after they took the majority of seats in the House, Pelosi named him “assistant to the Speaker,” a newly created position; he also led the Democratic Congressional Campaign Committee, the fundraising arm for House Democrats. Van Hollen’s top career contributors are lobbying firms Arent Fox and Arnold and Porter, defense contractor AEPCO, which is now part of a British defense contractor, employees of the Dept. of Health and Human Services and the American Association of Justice.[7]

His district is strongly Democrat with a state voter partisanship score (PVI)[8] of +D21. Since coming into office in 2003, his partisan voting scores in the 98% range on party-line votes.

Sen. Max Baucus (D-Mont.)

The chair of the Senate Finance Committee, Baucus played a key role in the enactment of the Patient Protection and Affordable Care Act. He is also the top Senate tax writer. His top career donors include New York Life Insurance, Goldman Sachs, American International Group, Ernst & Young and JP Morgan Chase & Co. Given the sway that the banking industry has with the Senator, his interest in raising taxes on the rich and corporations is minimal.[9]

Senator Baucus tends to be ambivalent on tax issues, generally favoring lower taxes across the board. He faces an electorate in the state of Montana that generally favors Republicans with a state voter partisanship score (PVI)[10] of R7.

Sen. John Kerry (D-Mass.)

The 2004 Democratic candidate for President is chairman of the Foreign Relations Committee, and sits on the Finance Committee. He’s also chair of the Communications Subcommittee of the Commerce, Science and Transportation Committee. Kerry’s career campaign finance totals include those from his unsuccessful run for the White House, His top donors include two higher education institutions, the University of California and Harvard, telecom giant Time Warner, and two major players in the 2008 financial meltdown and subsequent bailouts, Goldman Sachs and Citigroup.[11]

Senator Kerry’s state of Massachusetts is moderately Democrat, scoring a D12. But in the last Senatorial election, a moderate Republican won the other Senate seat. Senator Kerry votes with his party consistently, with a voting score of 100% on important party issues since 1990.

Sen. Patty Murray (D-Wash.)

Head of the Democratic Senatorial Campaign Committee, the fundraising committee for Senate Democrats, Murray is the co-chair, along with Rep. Jeb Hensarling, (R-Texas), of the super committee. Murray’s top career donors are abortion rights defender Emily’s List, software maker Microsoft Corp., the University of Washington, Boeing and the environmental organization the Council for a Livable World, according to the Center for Responsive Politics.[12]

Her constituents tend to vote for Democrats with a state voter partisanship score (PVI)[13] of D5. Like Senator Kerry, she votes the party line 100% of the time on important party issues.

Sen. Jon Kyl (R-Ariz.)

This is his third term and it will be his last. Sen. Kyl, the minority whip, is retiring at the end the current Congress. He also serves on the Senate Finance and Judiciary Committees. Over the course of his career, his top donors, according to the Center for Responsive Politics, are the Club for Growth (nearly all of the donations came in Kyl’s last reelection effort), law firm Snell & Wilmer, marketing and tourism firm Viad Corp., utility owner Pinnacle West Capital Corp. and Citigroup.[14]

He has a state voter partisanship score (PVI)[15] R6. However, as he is not running for reelection so any decision he makes contrary to his party’s position on tax and budget issues will have no negative consequences him at the ballot box.

Sen. Pat Toomey (R-Pa.)

In 2010, Toomey defeated Rep. Joe Sestak, (D-Pa.) who beat Democrat-turned-Republican-turned-Democrat Arlen Specter in the primary. Between his 2004 and 2010 races, Toomey served as president of the Club for Growth, where he opposed the bank bailout, the stimulus and tax increases. Toomey’s top career donors are the Club for Growth, hedge fund operator Elliott Management, gas provider Air Products & Chemicals, the Senate Conservatives Fund, a leadership PAC run by tea party favorite Sen. James DeMint, R-S.C., and utility PPL Corp.[16]

His state voter partisanship score (PVI)[17] is D2, which would suggest that his electorate only slightly favors Democrats.

Sen. Rob Portman (R-Ohio)

A former House member and U.S. Trade Representative and then director of the Office of Management and Budget under President George W. Bush, Portman’s top career donors include American Financial Group, Procter & Gamble, law and lobbying firm Squire, Sanders & Dempsey, investment house FMR Corp and uniform supplier Cintas Corp.[18]

His state voter partisanship score (PVI)[19] is R1, which means that his electorate slightly favors Republicans.

Rep. Jeb Hensarling (R-Texas)

Rep. Hensarling is former head of the Republican Study Committee–a group of GOP House members that develop conservative policies–and is currently chair of the House Republican Caucus. He also served on the Bowles-Simpson National Commission on Fiscal Reform. Hensarling is one of the co-chairs of the Supercommittee, along with Sen. Patty Murray, (D-Wash). Over the course of his congressional career, his top donors, according to the Center for Responsive Politics, are accounting firm KPMG, Texas-based electric utility operator Energy Future Holdings Corp., Bank of America, the American Bankers Association and AT&T.[20]

His voting record is strongly partisan, voting with his party approximately 99% since 2003. His state voter partisanship score (PVI)[21] is R17, ensuring his seat as a conservative Republican.

Rep. Dave Camp (R-Mich.)

The chair of the House Ways and Means Committee, his top five donors are Dow Chemical, Blue Cross/Blue Shield, Dow Corning, and a pair of Michigan-based utilities that are also top donors to fellow Supercommittee member Rep. Fred Upton, (R-Mich.), DTS Energy and CMS Energy.[22]

He favors tax decreases for lower and middle-income people while maintaining current tax rates for upper income people. However, he favors the elimination of all corporate and capital gains taxes.

His state voter partisanship score (PVI)[23] is R3 and his voting record over the last 20 years is in the high 90% range on party issues.

Rep. Fred Upton (R-Mich.)

Upton is the chair of the powerful House Energy and Commerce Committee. Among his top donors are AT&T, the telecom giant, CMS Energy, a Michigan-based utility, auto maker Ford Motor Company, appliance manufacturer Whirlpool Corp. and DTE Energy, another Michigan-based utility.[24]

Representative Upton’s state voter partisanship score (PVI)[25] is 0, which means that his district can go either way when electing its representatives. His voting record suggests he is moderate when it comes to voting the party line, with a partisan voting record falling in to 80% range.

While the current circumstances do not bode well for tax increases on corporations and the wealthiest of Americans, the question remains whether there are any scenarios where the Debt Supercommittee would recommend tax increases as part of its recommendations to the Congress. As the four scenarios indicate, while there is greater than 50% probability of achieving tax increases, the political risks associated with making this happen outweigh the probability that such a vote will occur.

Scenario 1: Democrats Hold Steadfast to a Tax Increase

Lets propose that all of the Democrats agree that raising taxes on corporations and the wealthy are critically important as part of the budget outcome. This assumes that powerful Democrat Sen. Max Baucus and Rep. Van Hollen take a much stronger position on this question and that all of the Democratic committee members recognize the urgency of increasing taxes for these groups. The risk to Senator Baucus is significant as this creates an opening for Republicans in the state of Montana to run a viable, anti-tax Republican against him in the next Senate race.

Interestingly, there is still less than a 50/50 chance that the committee will recommend tax hikes under this scenario. As Table 2 suggests, even if all of the Democrats take an absolute position in favor of tax hikes and make that a top priority, a tax hike remains unlikely.

This scenario assumes that all of the Democrats act in lock step, similar to where the Republicans are currently on this question. Because of the influence of the various members of the committee, most notably Senator Kyl and Representative Portman, tax hikes for the wealthy and corporations stand a less than 50% chance of being favored by the committee.

Table 2

	Position	Influence	Salience	P*I*S	I*S
Rep. Jim Clyburn (D-S.C.)	100	35	100	350000	3500
Rep. Xavier Becerra (D-Calif.)	100	40	100	400000	4000
Rep. Chris Van Hollen (D-Md.)	100	40	100	400000	4000
Sen. Max Baucus (D-Mont.)	100	95	100	950000	9500
Sen. John Kerry (D-Mass.)	100	55	100	550000	5500
Sen. Patty Murray (D-Wash.)	100	30	100	300000	3000
Sen. Jon Kyl (R-Ariz.)	0	85	100	0	8500
Sen. Pat Toomey (R-Pa.)	0	30	100	0	3000
Sen. Rob Portman (R-Ohio)	0	93	100	0	9300
Rep. Jeb Hensarling (R-Texas)	0	32	100	0	3200
Rep. Dave Camp (R-Mich.)	0	55	100	0	5500
Rep. Fred Upton (R-Mich.)	0	37	100	0	3700
			Sums:	2950000	62700
			Weighted Mean:		47.05

How can this scenario happen?

Democrat party leadership will have to weigh in with the committee members in a big way. Such a vote will create real problems for Senator Baucus and that problem will need to be addressed as part of this plan. Given its less than even chance of success, the risks to the Democrats will likely be too high.

Scenario 2: Democrats Lock Step and a Republican Waivers

This scenario assumes that all of the Democrats act in lock step but also considers whether there is sufficient pressure is built on Republican Rep. Fred Upton, who’s district could go either way in the next election.

The results are less than impressive. Even with Rep. Upton’s newfound ambivalence on not raising taxes for the rich, the probability of a tax increase recommendation is exactly 50%.

 

Table 3

	Position	Influence	Salience	P*I*S	I*S
Rep. Jim Clyburn (D-S.C.)	100	35	100	350000	3500
Rep. Xavier Becerra (D-Calif.)	100	40	100	400000	4000
Rep. Chris Van Hollen (D-Md.)	100	40	100	400000	4000
Sen. Max Baucus (D-Mont.)	100	95	100	950000	9500
Sen. John Kerry (D-Mass.)	100	55	100	550000	5500
Sen. Patty Murray (D-Wash.)	100	30	100	300000	3000
Sen. Jon Kyl (R-Ariz.)	0	85	100	0	8500
Sen. Pat Toomey (R-Pa.)	0	30	100	0	3000
Sen. Rob Portman (R-Ohio)	0	93	100	0	9300
Rep. Jeb Hensarling (R-Texas)	0	32	100	0	3200
Rep. Dave Camp (R-Mich.)	0	55	100	0	5500
Rep. Fred Upton (R-Mich.)	50	37	50	92500	1850
			Sums:	3042500	60850
			Weighted Mean:		50.00

Scenario 3: The Pennsylvania Effect

This scenario assumes that the Democrats act in lock step, considers whether there is sufficient pressure is built on Rep. Upton and that Republican Sen. Pat Toomey can be moved by his constituents. Those constituents generally favor Democrats for that Senate seat and they might sway his vote. Moving Sen. Toomey by way of massive constituent pressure by the Thanksgiving deadline poses significant challenges. Even if successful, the probability of achieving a vote in favor of tax increases by slightly more than 2 percentage points to 52% – not a comforting margin for the Democrats.

Table 4

	Position	Influence	Salience	P*I*S	I*S
Rep. Jim Clyburn (D-S.C.)	100	35	100	350000	3500
Rep. Xavier Becerra (D-Calif.)	100	40	100	400000	4000
Rep. Chris Van Hollen (D-Md.)	100	40	100	400000	4000
Sen. Max Baucus (D-Mont.)	100	95	100	950000	9500
Sen. John Kerry (D-Mass.)	100	55	100	550000	5500
Sen. Patty Murray (D-Wash.)	100	30	100	300000	3000
Sen. Jon Kyl (R-Ariz.)	0	85	100	0	8500
Sen. Pat Toomey (R-Pa.)	50	30	50	75000	1500
Sen. Rob Portman (R-Ohio)	0	93	100	0	9300
Rep. Jeb Hensarling (R-Texas)	0	32	100	0	3200
Rep. Dave Camp (R-Mich.)	0	55	100	0	5500
Rep. Fred Upton (R-Mich.)	50	37	50	92500	1850
			Sums:	3117500	59350
			Weighted Mean:		52.53

 

Scenario 4: The Hail Mary Plan

This final scenario takes into account the factors laid out in the previous scenarios but also considers whether tax hikes for the wealthy and corporations can be considered less of an important – or salient – issue in the relative scheme of things. Is there sufficient public outcry for a rebalancing of the tax burden? If the six Republicans can be made to waiver on this as a critical factor in their priorities on this issue – a very big challenge – the odds are increased only marginally.

This scenario demands a significant public outcry across the country for fairness in dealing with the current financial crisis and effectively places significant pressure on both Senators and Congressmen from both parties.

Herein lies a possible “Black Swan” event.

How this plays out is that there is a meeting of the minds between the Tea Party movement and the currently disorganized but growing Occupy Wall Street movement. There have been some interesting discussions between members of both groups about common views about the state of government and the economy that would suggest a common interest. Should this dialogue bring together these interests in a way that dramatically increases pressure on Congress in the coming days, the probability of a significantly different outcome could occur.

 

 

 

 

Table 5

 

	Position	Influence	Salience	P*I*S	I*S
Rep. Jim Clyburn (D-S.C.)	100	35	100	350000	3500
Rep. Xavier Becerra (D-Calif.)	100	40	100	400000	4000
Rep. Chris Van Hollen (D-Md.)	100	40	100	400000	4000
Sen. Max Baucus (D-Mont.)	100	95	100	950000	9500
Sen. John Kerry (D-Mass.)	100	55	100	550000	5500
Sen. Patty Murray (D-Wash.)	100	30	100	300000	3000
Sen. Jon Kyl (R-Ariz.)	0	85	80	0	6800
Sen. Pat Toomey (R-Pa.)	50	30	50	75000	1500
Sen. Rob Portman (R-Ohio)	0	93	80	0	7440
Rep. Jeb Hensarling (R-Texas)	0	32	80	0	2560
Rep. Dave Camp (R-Mich.)	0	55	80	0	4400
Rep. Fred Upton (R-Mich.)	50	37	50	92500	1850
			Sums:	3117500	54050
			Weighted Mean:		57.68

 

 

 

Despite the hue and cry from political pundits and the American electorate about the disparity in wealth and taxation between the wealthiest of Americans, big corporations and the majority of Americans, there remain too many disincentives for Congress to do anything but stay the course and cut the federal government’s budget while leaving tax rates untouched. As the chart below indicates, even in the best of circumstances, from the Democrat’s perspective, it remains politically extremely risky to push for increasing taxes for the richest as part of a budget deal because of significant political risk in proportion to the minimal likelihood that tax increases are successfully passed by the committee. Combined with the intransigence of the Republicans on the Supercommittee and in Congress as a whole, there would appear to be little political will to make tax increases part of an overall budget reduction plan.

 

Even if the Supercommittee Democrats are willing to force the issue, as the above chart indicates, only Scenarios 2 and 3 show any promise for real success.  Short of a miracle, we will not see tax increases any time soon.

 

 

 

 

 

 

 

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