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Beyond A Fair And Balanced Deal

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DEBT CEILING DEAL
AP

WASHINGTON -- By the traditional standards of Washington, the debt ceiling deal is a serviceable one. It ended a series of long nights and anguished speeches in the Capitol, the kind of theatrics legislators think makes them look hardworking and serious. The deal contains impressive numbers in the multiple trillions. And it has been framed by politicians and media alike in the standard, comforting left-right trope, which says that any deal attacked by the "wings" of each party must therefore be sensible. Consensus has been achieved, so the Beltway thinking goes. The messy process of American democracy has been reaffirmed once again, just when we thought we were drowning in an acid bath of acrimony.

But there is a problem: Washington's standards don't apply in the real world.

People who live in real-life America -- who live the daily grind of work (or the absence thereof), of fragile family finances, of Main Street storefronts and internet startups -- won't benefit much, if at all, from the deal and might well be hurt by it, according to an ideological range of economics experts surveyed by The Huffington Post. And that doesn't even count the unemployed who will stop getting federal benefits in 2012.

There are times when omnidirectional criticism of a political deal indeed means that is a sold piece of work. This is not one of those times.

The deal and the misguided first-blush reaction to it are evidence, if more is needed, that finding the way forward in 21st century America will require analytical tools that dig deeper than an ossified left-right axis dating from the Industrial Revolution. We can no longer be guided by a framework that sees the world through ideological wrestling matches: Marx v. Hayek, FDR v. Goldwater or AFSCME v. Tea Party. There has to be a new paradigm, and new answers, in a world of warp speed globalization, digitization and climate change.

So what's wrong with the debt ceiling deal?

For one, you don't have to be Paul Krugman to think that it is folly to withdraw $1 trillion from the economy at a time when growth rates are so anemic. Recent revisions in the GDP numbers show that the economy has actually been worse than advertised for the last year or more -- a fact than anyone on Main Street could have told you without resorting to federal number crunchers.

"I am a decifit hawk, but I am worried" said Jay Powell, a former investment banker and Treasury official in the first Bush administration who is now at the Bipartisan Policy Center. "The real question is how we execute long-term deficit reduction without holding our heads underwater for the next ten years."

Putting money into -- rather than taking it out of -- the economy is still a good idea for the short run, Powell said. The bipartisan center, headed by the likes of former senators Howard Baker and Tom Daschle, has proposed deep spending cuts, but only after a yearlong, sweeping payroll tax holiday to spur demand. Doing the latter is still a priority, he said. "A lot of the pain in this debt ceiling deal is back-ended," he said, "but there is still a cause for concern about the immediate impact."

For the last two or three years, according to Powell, the newly revised average growth rates have been less than 2 percent -- at best. "Another decade like this and there won't be much left of the social fabric," he said.

At the Center for American Progress -- a think tank that has supplied the Obama administration with legions of staffers -- the reaction was even more urgent. "It's a very sad day for working people in America," said Heather Bouchey, a senior economist there. "This deal is perpendicular to the conversation we need to be having about how to get unemployment down so that GDP can go up. The fact is that there is no demand. The housing bubble created trillions of dollars of wealth that vanished. People can no longer borrow against the value of their homes, even if they still have them. Until demand returns, we are in deep trouble, and this deal does nothing to spur demand. In fact, it does just the opposite."

The notion that government borrowing is about to cause a dramatic rise in interest rates is nonsense, she insisted. "There is no evidence of that. Where else are people going to put their money? This is a good time to be borrowing and will continue to be."

At the libertarian Cato Institute, economist Dan Mitchell dismissed the deal as a phony exercise that would do little to convince the markets that the U.S. is serious about long-term fiscal responsibility. Most of the agreed-upon cuts won't take effect immediately, as Powell also noted, and the long-range changes -- assuming there are any -- would take place over a decade. In the meantime, Mitchell said, the deal doesn't do anything by way of tax reform for the average family, and it doesn't do anything to show that we won't eventually go the way of Greece and Portugal.

The deal might have some minimal effect on the markets -- if only by bringing a mild sense of relief that a manufactured crisis has ended. "It might have a calming, soothing effect to some degree," Mitchell said. "But in answer to your question about what this does for or to the average family, the answer is: almost nothing, period."

What is missing in the deal -- -and in Washington generally -- is a frank, fundamental discussion of how to redesign 21st century government: its taxing and spending policies, to be sure, but also, more profoundly, the very vision of what government is for.

The Tea Party claims to have its own answer to that. In their most extreme form, they are suggesting nothing less than a slow-motion secession from the federal social compact of the last 75 years.

As the "party of government" since the days of FDR, the Democrats need to find an answer. Right now they are hampered in doing so because voters see the party as no less beholden to fat cats than the GOP establishment is. At least that is the glum conclusion of Democratic polltaker and former Clinton advisor Stan Greenberg. There are those who think that Bill Clinton began the process of turning the Democrats over to Big Business. But that, if anything, makes Greenberg's findings more powerful.

Until the Democrats can make the case that they truly represent working men and women -- and until they can offer a new and convincing vision of what government can do -- the Beltway will keep on producing deals like this one: a "fair and balanced" solution to a made-for-TV crisis.

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