A supercommittee failure would trigger $1.2 trillion in automatic spending cuts and set up a yearlong fight among lawmakers to protect favored programs.

It would also launch a heavy lobbying effort on K Street, where defense firms in particular would be eager to prevent automatic cuts to the Pentagon budget.

Failure could cause stock markets to crash, would raise new questions about the U.S. credit rating, and it will also frame a series of issues on taxes and spending central to the 2012 election.

Here’s a look at the ramifications for Washington and beyond if the 12 panel members fail to reach their mandate of at least $1.2 trillion in recommended deficit cuts over the next decade. Their deadline is Nov. 23.

2012 campaign messaging

Both parties have a lot to lose in terms of their messaging for 2012 if the debt panel fails.

Democrats hope to win back senior voters they lost in 2010 by campaigning against proposals by House Budget Committee Chairman Paul Ryan (Wis.) and other Republicans to cut Medicare and Medicaid. But a deficit-reduction deal that cuts Medicare would obscure that message.

Republicans wish to blame Democrats for running up the nation’s tab and proposing higher taxes, but a bipartisan deficit deal that raised new net tax revenues would blunt the GOP’s messaging, and could open up Republicans who voted for the deal to Tea Party primary challengers.

President Obama’s future

Republicans say President Obama would benefit politically if the supercommittee fails and have accused the White House of rooting for failure.

“I’m afraid this president is running for reelection, not really trying to solve the problem, and he wants to run against a do-nothing Congress,” said Sen. Ron Johnson (R-Wis.). “The last thing he wants to see is the Congress [doing] something.”

Obama has seen his poll numbers improve during the last month as he has assailed Republicans for refusing to pass his jobs bill; Gallup polls showed Obama trailing a generic Republican candidate for eight months, but now the president is tied with the generic opponent.

White House administration officials dispute the GOP argument. They say Obama has pushed for a grand bargain on deficit reduction — on the scale of $3 trillion — for months. Democrats also say Obama could count an agreement as a victory after pushing Republicans this summer to agree to increases in tax revenues.

It’s also possible that a failure could hurt Obama if it triggers new economic ills that imperil the economy, which Obama’s GOP rivals say he has bungled.

Wall Street
and the economy

Wall Street analysts and some political experts warn that the failure to make a deal could result in another downgrade of the nation’s credit rating, sending the stock market into freefall.

Merrill Lynch warned last month that it expects “at least one credit downgrade in late November or early December when the supercommittee crashes.”
Democratic leaders, however, are skeptical of the dire predictions.

“Nobody thinks a bad deal is better than no deal,” said a Democratic leadership aide, who added that market reaction is “only a serious concern if we seek to undo some of the trigger cuts.”

Chad Stone, chief economist for the Center on Budget and Policy Priorities, a liberal-leaning think tank, told The Hill in late October: “The idea that the financial markets will go into terrible panic if the committee doesn’t come up with a plan … doesn’t strike us as that credible.”

Lobbying

Automatic cuts wouldn’t be triggered until 2013, which gives lobbyists plenty of time to try to change minds in Congress.

Lobbyists and congressional aides say they expect the Pentagon, defense contractors, liberal activists and labor unions to launch a huge campaign to reduce the scheduled cuts.

“People would spend a lot of time making it not go into effect or have defense not go into effect,” said Steve Elmendorf, a Democratic lobbyist. “If the committee fails and there’s a prospect of a $1.2 trillion sequestration in 2013, people will spend a lot of time in 2012 trying to [affect those cuts].”

It’s also possible Congress could stop the cuts, as the sequestration process is far from automatic. It takes a simple majority in the House and 60 votes in the Senate to void them in part or entirely, and some lawmakers, such as Sen. Jim DeMint (R-S.C.), are already vowing to ignore them.

Supercommittee members

Sens. Pat Toomey (R-Pa.) and Rob Portman (R-Ohio) and Reps. Jim Clyburn (D-S.C.), Xavier Becerra (D-Calif.) and Chris Van Hollen (D-Md.) might have the most to lose of the panel members.

All are seen as having ambitions to climb higher in leadership. Portman, who represents a crucial presidential battleground state, is a potential vice presidential candidate.

Failure to reach a deal would likely spark disparagement from the press in the short term. CNN aired a graphic recently suggesting the panel’s members would be viewed as eunuchs — the castrated servants of royalty.

But lawmakers say the supercommittee members would not face much backlash at home. They say a much bigger threat to future leadership ambitions would be signing a deal the party’s rank-and-file detests.

“In terms of advancing in your party structure, it might actually be better to fail than to advocate something the party had to swallow as a bitter pill,” said a Republican senator. “It may have more impact to be one of the guys who was willing to raise taxes.”

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