After weeks of wrangling, the White House and congressional Republicans reached an agreement on a debt reduction plan that has in it some good, some bad and a lot of ugly.
The best thing about the deal is that it keeps the nation from financial default which could have triggered an economic crisis not only in the United States but throughout the world.
The vote in the House and the Senate showed a bright moment of bipartisan unity and decency when Rep. Gabrielle Giffords made her first appearance in Congress since being shot in the head seven months ago. Giffords drew thunderous applause from both Democrats and Republicans as she walked into the House chamber unannounced and cast her vote in favor of the bill.
The bill also does not directly affect Medicaid, Medicare or Social Security and most of the cuts in discretionary spending will come at the end of the 10-year term of the deal. The bill will also require cuts in defense as well as domestic spending.
The bad thing about the bill is that the deal calls for more than $2 trillion in cuts over the next decade in the absence of any new tax revenue. The deficit deal represents a new and dangerous era of fiscal austerity when unemployment remains above 9 percent and economic growth is slowing.
The new eras of spending cuts and austerity effectively eliminates the option of using government spending to stimulate a weak economy.
The deal also requires a new committee of members of Congress—composed of an equal number of Democrats and Republicans and from the House and the Senate—that will meet this fall to try to come up with ways to reduce the deficit by $1.5 trillion in automatic budget cuts over 10 years, divided between military and social spending but leaving Social Security and Medicaid alone. Federal agencies are expected to bear the brunt of the deficit cuts.
The truly ugly part of the debt deal is that once again President Obama allowed Republicans to frame the debate. The Republicans have now managed to focus the debate on deficits and spending cuts and not on what the country urgently needs now—economic growth and jobs.
Republicans were also allowed to get away with blaming the deficit on Obama when the main cause of the deficit is the Bush era tax cuts and two unfunded wars. President George W. Bush inherited a surplus from the previous Clinton administration.
The debt ceiling has been routinely raised under Democratic and Republican presidents. This time while controlling only one House of Congress, Republicans bullied their way and linked raising the debt ceiling to spending cuts. The president should have insisted on a clean unencumbered bill to raise the debt ceiling.
Economist and New York Times columnist Paul Krugman said the Republicans have learned that bulling works. In a column written after the debt deal bill was approved Krugman said “the GOP has just demonstrated its willingness to risk financial collapse unless it gets everything its most extreme members want. Why expect it to be more reasonable in the next round,” said Krugman.
“In fact, Republicans will surely be emboldened by the way Mr. Obama keeps folding in the face of their threats. He surrendered last December, extending all the Bush tax cuts; he surrendered in the spring when they threatened to shut down the government; and he has now surrendered on a grand scale to raw extortion over the debt ceiling,” Krugman said.
Washington Post columnist Eugene Robinson stated it plainly.
“Republicans insisted on budget cuts only, with not a cent of new revenue—and that, ladies and gentlemen, is what they got. There’s no way to spin it: Boehner and the GOP won. Obama and the Democrats lost.”
The debt deal will result in deep spending cuts without new revenue and not attempt to close corporate loopholes.
The average working Americans were the losers in the debt deal.
(Reprinted from the Philadelphia Tribune.)