Before I get into the body of this post, I want to say this: I wouldn’t characterize this as a “win,” either for Democrats or the nation. Any time a political party is willing to bring us within 48 hours of default – and perhaps closer pending the actual votes in Congress – is a very bad, and sad, say for America. There is really no practice reason why the debt ceiling couldn’t have been raised cleanly like every other time. This increase pays for the FY 2011 continuing budget that the Tea Party House itself approved back in the Spring, and they would have gotten another chance to affect spending – when it’s actually appropriate to do so – when dealing with the FY 2012 budget this fall. But they knew the default was about the biggest hostage they could take and so they took it, welfare of the nation and the economy be damned.
It’s also not a “win” in that Obama didn’t get revenues, though in hindsight, I don’t think there was ever any hope of that, even if Obama and Boehner had hammered out some grand bargain. The GOP House would never have stood for it, and I suspect Boehner largely knew this, which is why he pulled out when it actually seemed like an agreement was imminent. Nothing would end his Speakership sooner than presenting a bill with tax increases to his House and having it get obliterated. In essence, how the Tea Party treated this situation, Obama didn’t win and there was really no way he could “win.” Most of the blathering I hear about Obama caving or how Obama should have stood his ground never really address how he gets a debt ceiling increase past the House, except by either claiming the Tea Party would have eventually caved (do you really believe that?) or he should have used the 14th Amendment from the start (screw that whole governing business!). The fact of the matter is that, when one side takes a hostage and you have literally no choice but to deal with them, all the likely outcomes are likely not going to be to your liking.
Now that I have that out of the way, I think, given the circumstances and assumptions that Obama was forced to work under, he came off pretty well in the end. Let’s take a look at the debt ceiling deal piece by piece to find out why:
1) Obama got his full debt ceiling increase without a threat of default until 2013.
This is a win for Obama and really a needless loss for the GOP. They had also agreed to have a long term extension until a week or two ago when they decided, once again, to move the goalposts and ask for a short term extension, with the 2nd half held hostage again in the winter. This changing of the goalposts turned this from just something everyone agreed on to an Obama win in the end.
2) The First tranche of cuts is largely non-controversial
The first tranche of cuts amounts to $917 billion, which was largely centered around the framework agreed to in the Biden-Cantor talks from two months ago. Unless you’re saying that Obama had already “caved” then (and I’m sure you can find people who would say that), then this isn’t really that much of a cave. Half of those cuts, after taking out savings from debt interest, are from defense, something which it was reported that Boehner was trying to get lowered but was unsuccessful in doing so. The other $350 billion or so are from spending caps on discretionary spending, which don’t even go into effect until FY 2013 (pending the upcoming FY 2012 budget battle, of course).
It also fully funds Pell Grants, one of the things that helped doom Boehner’s original bill but which Obama has been fighting for.
Frankly, unless you’re against cutting the budget at all (and I know there are many people out there that do), there isn’t much here one can complain about.
3) The trigger
The bill also sets up a joint committee (the so called “SuperCongress”) of 12 members of Congress, 6 from each House and 6 from each party, to recommend by Congress’ Thanksgiving break around $1.5 trillion in further deficit reduction. Despite Boehner’s slides to his caucus, anything and everything is on the table in this committee. To try to ensure that this committee makes recommendations and that it’s recommendations are taken seriously, the bill comes with a trigger that goes off if either the committee can’t agree on a plan, if Congress votes down the plan, or if Obama vetoes the plan (and Congress doesn’t override).
The would include $500 billion in additional defense cuts – bringing the total to a whopping $850 billion over 10 years, as well as another $500 billion in across the board cuts, mostly to discretionary programs, but Medicare would also get cuts on providers, but not beneficiaries. Pretty much all other mandatory programs – Social Security, Medicaid, veterans benefits, unemployment insurance, etc. – would be spared from the cuts, as well as reportedly DOD salaries (I’m not sure if civilian salaries are protected or not, but my impression is that they would not be).
The point of this is to give each side incentive to deal in the committee and agree to the committee findings. However, I find it hard to see how Democrats didn’t get the better of this deal.
First, in any committee deal that were to cut $1.5 trillion entirely by cutting programs, it’s hard to see how discretionary programs would fare any better than the $500 billion in cuts that it’s already receiving in the trigger, so in that sense, if there is a cuts-only proposal, the trigger will likely already be the favorable option to democrats. On the Medicare front, those cuts are limited and to providers, so they’re not all that bad, and such cuts would probably become necessary in any bill to address Medicare spending now or in the future anyway, so it doesn’t seem to be all that big of a loss.
Meanwhile, if the GOP insist on cutting discretionary spending further, or on cutting Medicare further, or on cutting Social Security or Medicaid or other programs Democrats want, they can just threaten to pull the trigger, which doesn’t include those cuts. About the only real incentive for Dems to deal, if it’s a cuts only proposal, is to make the cuts more focused instead of just being across the board, but I’m not sure that will be enough incentive to not just pull the trigger.
The GOP, on the other hand, would be facing a pretty ugly choice: raising revenue or having the $500 billion in defense cuts in the trigger. If democrats are smart, that will be the choice they give them: give us revenue or we pull the trigger, because Democrats, frankly, aren’t going to lose much more by pulling the trigger than by having a cuts only deal as I laid out above. Neither of those choices would be popular with GOP politicians or their base, and many of them live in districts that would be hit hard by budget cuts.
I’m sure the GOP will try to attack Democrats for “gutting the defense budget,” but that is going to be hard to make fly. First, they would have agreed to this deal in the first place (if they do, indeed pass it), and any recommendations that come from the committee, if they include new revenues, would have to be bipartisan.
It also gives democrats the chance to turn the national defense argument on it’s head and against Republicans. If the GOP decides to pull the trigger instead of raising revenue, it opens them up to attacks that they chose to gut defense so that billionaires and oil companies can keep their tax breaks. I don’t know about you, but it’s hard to see how that becomes a defensible position at all. That doesn’t mean the GOP will choose the tax cuts, but it will be exceptionally hard for them to defend that position during the election.
4) Bush tax cuts are still scheduled to expire
I’m still not sure about the entire dynamic with the Bush tax cuts yet, but this leaves the Bush tax cuts as they are, meaning they are all set to expire come 2013. I still think the GOP feels like they have some leverage on the issue because they may feel Obama won’t let the cuts expire for everyone, so they may not be willing to deal with them in the commission. However, when it comes to the tax cuts, Democrats, if they choose, can use it as leverage, because they will simply expire by doing nothing.
The Bush tax cuts were extended back in 2010 for a few reasons. One reason was that we were just coming out of a recession and Obama didn’t want to risk raising taxes on the middle class. The deal was also a vehicle to gain several important things as well including an extension of unemployment insurance, as well as clearing the way to pass the START treaty and Don’t Ask, Don’t Tell repeal. If one actually looks at the details of that deal, Democrats really got more than the Republicans did in the end. However, that dynamic may change later. The ONLY reason Obama may have to not repeal them later is to keep tax cuts for the middle class, and I’m not really sure that’s a good enough reason, especially when it can be used an election issue against Republicans. This should have been done back in 2009 (no thanks to the Democratic Congress) but, anyway, what’s past is past in that regard.
While, again, I wouldn’t characterize this as a win, there are a lot of things here that aren’t what the GOP wanted, and they may be faced with some potentially ugly choices in the future. Their goal was to get “Cut, Cap, and Balance” and they didn’t really get any of it in the form that they wanted. They don’t get the “cut” part – spending cuts aren’t supposed to take place until 2013. The “cut” part of their plan was supposed to go into effect in FY 2o12. They got a sort of “cap” in the form of spending caps, but they are nowhere near as deep as the spending caps in their Cut, Cap, and Balance bill. And while they do get a vote on a balanced budget amendment, 1) nothing is bound to it to require that it passes, 2) it will lose, 3) there are at least whispers that the GOP may offer a plain vanilla balanced budget amendment (ie, no spending caps and no 2/3 tax requirement) to try to maximize the votes that it gets, which is a major loss for the tea party which saw both spending caps (at 18% of GDP) and a 2/3 requirement to raise taxes as an essential part of a balanced budget amendment. I’m sure they would figure that if the amendment is going to go down in flames anyway, at least make it worth it.
The final remaining piece of this puzzle is who gets put onto the joint committee. This isn’t an insignificant matter as both parties will likely go after the most moderate member of the opposing party. I have a feeling both Boehner and Pelosi will likely ensure that whoever gets put on the committee from the House will look after their interests, so the real action regarding who is placed on the committee will likely be from the Senate. There is a big difference between having Schumer be the most moderate member vs. Baucus vs. Manchin for the Democrats. Likewise, there is a difference between having a committee made up of Hatch, Lee, and Paul for the Republicans vs. one made up of, say, Cornyn, Coburn, and Kirk.
Remember, the gang of six included two moderate Democrats, Warner and Conrad, as well as three republicans, Crapo, Coburn, and Chambliss, and they were able to come up with a plan that included revenue. It seems likely, unless someone like Senator Manchin or Representative Schuler gets put on the committee, that all six democrats will be pro-revenue. It’s also likely that all three Republicans from the House will be anti-revenue. So the question is, will McConnell put anyone on the committee that he knows might consider revenue? And unlike the House, there are a considerable number of Senate Republicans who might be open to the suggestion, ranging from Brown to Kirk, to the Maine twins, to the three members of the gang of six, and perhaps others. It may truly be up to McConnell’s choices as to whether revenues become a significant part of the committee’s recommendations.
I know many Democrats are unhappy with deficit cutting, and virtually all Democrats want new revenues. However, with the Bush tax cuts still scheduled to expire, the revenue side is still open for Democrats, even if they don’t get it in the committee or if the trigger is executed. However, here are some cold hard facts:
- Many, many people are freaked out by deficits as large as we have right now. It’s not good politics or policy to run $1.5 trillion deficits, no matter what anyone tries to argue. While reducing unemployment is seen as the more pressing matter, people do care about the deficit, and anyone who tries to argue otherwise is fooling themselves.
- Yes, revenues are a problem. In FY 2010, the United States was looking at receiving the lowest share of revenue, as % of GDP since 1950. That’s a problem. However, spending was also the highest it had been as a % of GDP since 1945, so clearly spending is part of the problem as well. Part of that is stimulus spending and other short lived spending, but it’s still a problem.
At this point, after the FY 2012 budget fight, the fight for what direction the United States should go will be fought out in the 2012 direction, and I know one thing: the only way we’re going to move in the correct direction is by re-electing Obama and electing a Democratic Congress, regardless of how one feels about this deal.