(Bloomberg News) As they struggle to reach an agreement over how to extend the nation's debt limit and trim budget deficits, Republicans and Democrats are turning to an enforcement tool, called a "trigger," with a history of failure.

 

Republicans are insisting that the trigger cause across- the-board, automatic spending cuts if Congress comes up short of implementing its own budget reductions. Democrats want the mechanism to force deficit reduction through both spending cuts and adding revenue.

"We are very much in favor of that, because we want the kind of Damocles sword hanging over Congress to force it to make a decision and act," Jay Carney, White House spokesman, said yesterday.

A trigger could be a potential area of compromise if it assumes new revenue through overhauling the tax code, Senator Mike Crapo, an Idaho Republican, said in an interview last week. "A trigger that would raise taxes, I don't think that's acceptable" to Republicans, he said.

Even if the parties can reach agreement to avoid a possible default on Aug. 2, Congresses have repeatedly ignored or overridden automatic cuts dictated in previous legislative agreements.

For that reason, budget and credit rating experts are skeptical of the device, and they are even more critical of the call in both the House and Senate for indentifying future cuts through a newly created bipartisan committee -- another Washington mainstay that can't guarantee any real impact.

'Congress Can Undo'

"Anything Congress does, Congress can undo," said Bob Bixby, executive director of the Concord Coalition, an Arlington, Virginia-based group that advocates for balanced budgets. "They can't really bind themselves. You really have to have a political will to make these things work or they won't."

Formulating an effective way to hold Congress to its promises to make the choices required to slash trillions in spending in the next decade is key to satisfying demands by credit ratings agencies like Standard & Poor's for a credible commitment to taming the long-term debt.

Without enforcement powers, any new bipartisan committee may not be taken seriously on Wall Street and by ratings agencies, said David Ader, head of government bond strategy at Stamford, Connecticut-based CRT Capital Group LLC.

Toxic Term

At least three commissions in the past year have failed to offer a plan that gained traction, including Obama's National Commission on Fiscal Responsibility and Reform, a group of six senators often called the "Gang of Six" and a bipartisan panel of lawmakers led by Vice President Joe Biden.

A reference to a "bipartisan deficit commission" has become so toxic in Washington that Senate Minority Leader Mitch McConnell admonished reporters who used the term, insisting they call the proposed new panel a "committee." That hasn't diminished the skepticism.

"What can this committee offer that can be so dramatically different than what we've heard before?" said Ader. "It'll be tiresome and frustrating," he said. "I don't see how it's possible it'll have any teeth to it."

Standard & Poor's has warned there is a 50 percent chance it will lower the U.S. government's AAA credit rating by one or more levels within three months. S&P said that, even if Congress raises the debt limit in time to avert a default, it might lower the U.S. sovereign rating to AA+ with a negative outlook if it isn't accompanied by a "credible solution" on the debt.

Bill Hoagland, a budget adviser to Republican congressional leaders from 1982 to 2007, isn't convinced a new committee will meet the credit rating agencies' demand.

'Kicking the Can'

Republicans will appoint lawmakers who've taken an oath against tax increases, while Democrats will name members unwilling to allow cuts to Medicare and Social Security, Hoagland said. "I see this committee kicking the can down the road again," he said.

House Speaker John Boehner's deficit-reduction imposes statutory spending limits, a device that worked successfully for almost a decade as part of the 1990 Budget Enforcement Act. It's a simple trigger: failure to stay below the spending caps prompts automatic, across-the-board spending cuts.

The U.S. went from a $221 billion deficit in 1990, the year the caps were enacted, to a $236 billion surplus in 2000, by abiding by the spending caps during a period of economic growth that brought in new revenue. In 2002, the provisions both expired and Congress didn't renew them.

Health Care, Entitlements

Hoagland said this particular trigger may not be effective in reducing the nation's debt because discretionary spending covers only roughly 18 percent of the federal budget.

"The real problem remains the health care, entitlement programs and the revenue side," he said.

The 1990 agreement also featured a pay-as-you-go requirement for mandatory programs and revenues. A trigger was enacted to enforce the caps and the "paygo" requirement.

Still, Congress overrode the enforcement provision two out of the three times it was triggered, according to an April 28 report by the Peterson-Pew Commission on Budget Reform.

And in 1985, the Balanced Budget and Emergency Deficit Control, or the Gramm-Rudman-Hollings Act, included a trigger to enforce deficit targets. If the year's target wasn't met, spending cuts were triggered. In the five years of the act, the triggers kicked in twice, one of which was reduced by Congress and the other overridden by a subsequent budget agreement.