Grading the Debt Deal: The Good, Bad and the Useless

The following was published as on Outside the Box column on Marketwatch.com

http://www.marketwatch.com/story/grading-debt-deal-the-good-bad-and-the-useless-2011-08-01?siteid=nbch

It seems nothing is ever easy. In politics, that is almost always the case. Even the simple goal such as raising the federal debt limit so the government can continue to borrow to fund its enormous deficit becomes an almost Herculean task. After months of wrangling, negotiating, walkouts, taunts and name-calling, the political system has yielded a result. The federal debt limit will be increased, and the direction of federal spending will be slightly altered. Now, it is time to grade the results and the elected politicians who created it.

 The “deal” intends to save (note the word “save” rather than “cut”) $917 billion over the next 10 years and raise the debt ceiling to carry the government through the end of this year and mostly likely until early 2013 without another Congressional vote on the limit itself. A new Joint Congressional Committee would be formed to come up with an additional $1.5 trillion in deficit reduction o be voted on before the end of this year. It is all complicated. For a description from the CBO,  http://www.cbo.gov/doc.cfm?index=12357

 

To put it all in context, the debt has increased about $4 trillion in the last 3 years and is projected to almost double to $27 trillion in the next 10 years according to the Congressional Budget Office. Next year the yearly budget deficit will be roughly $1.1 trillion down slightly from $1.4 trillion this year. These numbers are numbing. 

 

The agreement will be hailed or lamented by some as deep cuts in federal spending, others will view it as a sort of down payment on the deficit, while others will think it rather meaningless.

Grading the substance is relatively easy because there is not much there.

Increasing the debt limit-This had to be done to avoid dire consequences. The government should be able to able to fund its activities through borrowing for about 18 month or so. President Obama will not most likely have to make another request to increase the debt ceiling but while some think that is good for him, I doubt the debt albatross around his neck will fall neatly into the sea without consequences.   A minus

 Curb spending-To a certain extent, agreements to cap or curb spending over a long time frame are not very reliable. In this case, there is a small meaningful reduction in spending in FY 2012 of $44 billion, or 4.2%, below an earlier CBO baseline. Spending caps for FY 2013 are $62 billion below the baseline. However, some of these reductions can be delayed.  The automatic spending triggers and cap are bad policy and have never worked. C minus

Revenue-Democrats want higher taxes on just about everything. Republicans never met a tax they liked. Republicans won this issue politically, but made a mistake in not agreeing to a few simple not dreadful tax changes in exchange for bigger and firmer spending reductions. This issue will not go away and eventually some tax increases will be part of the equation.  D

Entitlement programs-Not really touched, but are the largest source of future savings and present the biggest political problem. The time constraints and importance of this issue turned it from an F to an incomplete.

Congressional Joint Committee- This beast to make deficit cuts has to rank up there with great idiotic gimmicks. It reflects the almost total breakdown of “regular order” in Congress, its ability to address issues through the normal legislative process. D minus

The cast of characters who did all of this:

President Obama- He achieved the debt limit increase the government had to have. However, it is a legitimate question whether he was ever behind any real spending reductions. Every move seemed to be political in nature.  Depending on your viewpoint, he sold out, saved the day or is way above his pay rank. His off-and-on style, sporadic effort, leading from behind on the issue gives great pause. C

John Boehner- No politician in Washington has taken more guff in the past few months than the Speaker of the House. His caucus is unruly, even more conservative than he is, and he came within in a whisker of failing to deliver anything.  However, I give him credit for finally figuring it out and keeping the kiddies in the corral. C plus

Harry Reid- By far the nastiest and cantankerous figure involved. He would prefer to make some useless political point than actually solve an issue. He dillied, dallied, and wasted time. C minus, no make that D plus

Mitch McConnell- The Senate Minority Leader gets the best marks. He recognized early the problems and attitude of the White House, formed his own proposal, and injected himself where necessary. The fact anything was done is largely a result of his effort. B plus

Other players in the saga:

Nancy Pelosi— The former Speaker of the House was never in the game.  Incomplete/DNP

Vice President Biden—Performed the job as message carrier well and his work as part of the early negotiating group was adequate. B

Eric Cantor- The House Majority Leader the early point man held true to the tea party agenda. C

Gang of Six- Nice try for one day, who are they again? D

Tea Party- The Tea Party if I can use the term to mean fiscal conservative Republicans had a huge impact. No tax increases, getting a vote on their precious Balanced Budget Amendment and changed the direction of federal largess. Not sure how long this momentum will last or how it will play out in the next election. A minus for now

There it is. This process is over for now, can kicked down the road, hard decisions to be delayed again and more debt to come. The good news is Congress will recess for the month of August.

 

Comments

[Beekeeper]

You are much too reasonable. Why is everyone upset? Nothing really happened. and I was wondering, what are the Liberals and Socialsit willing to give Up if this is so horrible. ? I think nothing

[moncler coats]

I'd be interested in hearing. The TOS seems rather clear that it is not unless expressly approved by Amazon. I guess if the library got it in writing then they would be ok.