Q&A: What Does The Debt Ceiling Deal Mean For Ordinary Americans?
Over the past few days, the media has frothed over their horse-race traditions, pleasuring themselves with the question of who "won" the debt ceiling debate. And once they felt they had an adequate answer to that question, they threw a party! Left out of the conversation, as per usual, are ordinary Americans. Because I doubt that more than a few will make the attempt, I shall hereby try to explain what just happened in simple terms, and then inform all the normal people who are typically left out of the political conversation what life is likely to be like, from here on out.
I'd say, "Enjoy!" But there's no enjoyment to be had.
So, what are the basics of the debt deal?
Simply put, the deal that's been wrought trades two rounds of steep spending cuts for two matching increases in the debt limit. The first set of cuts comes immediately, to the tune of $900 billion. Per the White House's fact sheet, these cuts are "balanced between defense and non-defense spending." By "balanced," we mean "$350 billion from the base defense budget" and the remaining amount coming from non-defense discretionary spending. That leaves entitlement cuts out of the first round, which means we're talking about cuts to education, health and human services, infrastructure spending, and the like. There are "binding caps" on these cuts that extend for the next ten years.
After that, Congress forms a "super committee" that is tasked with identifying an additional $1.5 trillion in additional cuts. Here, entitlements become part of the target. The super committee is also allowed to work on tax reform.
Plus there is a promise to allow a vote on a balanced budget amendment.
A super committee? They are actually going with "super committee?"
Yes. We are governed by children. The thinking seems to be that previous committees have failed to address the problem, but maybe by improving this committee's self-esteem by imbuing it with the descriptor "super," they will fare better. Keep in mind that one of the groups that have failed to address the pressing needs of the nation over the past decade is called "Congress."
How does the super committee work?
Congressional Democrats and Congressional Republicans shall, from the House and Senate, each select six of their most able bodied deficit peacocks. Those with the prettiest plumage will get in. There, they will work to make their $1.5 trillion in cuts, with a Thanksgiving deadline. It will require seven yes votes to send a recommended plan to Congress. Both houses of Congress will hold a straight up-or-down vote on the committee's recommendations, which they cannot amend.
This at least seems like an improvement over the Simpson-Bowles commission, which needed a supermajority to agree on a plan, right?
Indeed, that's true. But the super committee remains a venue rife for dysfunction. Nancy Pelosi, for example, has promised to only send members to the super committee that will hold the line on entitlement cuts. Her counterpart, John Boehner, has said that he believes the super committee lacks the power to suggest or impose any revenue increases. He's wrong about that, as far as the committee's powers go, but the message is clear -- those GOP votes won't include any badly needed revenue increases.
What if Democrats insist on revenue increases?
That's where lobbyists ruin the world, as per usual. Matt Yglesias spells out the scenario:
First, Republicans refuse to agree to more revenue. Second, Democrats refuse to agree to a no-revenue deal. Third, lobbyists for the defense and health care industries get nervous. Fourth, lobbyists for the defense and health care industries remember that they are high-income people who don't want to pay taxes. Fifth, executives at defense and health care industries remember that they are high-income people who don't want to pay taxes. Sixth, executives at defense and health care industries start lobbying Democrats in swing districts, red states, or in which key weapons manufacturing or certain hospitals are major industries. Seventh, Democrats fold.
So, what happens if the super committee gets bogged down?
Well, that's where the real fun begins. Should the super committee fail (or should Congress fail to pass their recommendations), it will touch off the "trigger!" As Ezra Klein explains:
In his remarks on Friday, President Obama said he would support a trigger if it was done in "a smart and balanced way." The implication was that it had to include tax increases as well as spending cuts, as a trigger with just spending cuts wouldn't force Republicans to negotiate in good faith. The trigger in this deal does not include tax increases.
What it includes instead are massive cuts to the defense budget. If Congress doesn't pass a second round of deficit reduction, the trigger cuts $1.2 trillion over 10 years. Fully half of that comes from defense spending. And note that I didn't say "security spending." The Pentagon takes the full hit if the trigger goes off.
The other half of the trigger comes from domestic spending. But Social Security, Medicaid and a few other programs for the poor are exempted. So the trigger is effectively treating defense spending like it comprises more than half of all federal spending. If it goes off, the cuts to that sector will be tremendous -- particularly given that they will come on top of the initial round of cuts. Whether you think the trigger will work depends on whether you think the GOP would permit that level of cuts to defense.
To be clear, while the trigger cuts spare the beneficiaries of entitlement programs, it doesn't mean that entitlements will be left unaffected. As Klein explains elsewhere, Medicare providers are on the chopping block -- and it's not unreasonable to suggest that a tightened budget anywhere in the Medicare system will end up adversely affecting recipients as well.
Well, regardless of how the GOP feels about Medicare, that threat to defense spending would seem to be a powerful incentive for the GOP to play ball in the budget debate, right?
Credit where due: there are plenty of Democrats with a hard-on for defense spending and who get courted by defense lobbyists. And there's some Republicans who are happy to support cuts to the military budget. But I can see your point. Indeed, putting the Pentagon in front of the trigger is often presented as the bitter pill that Republicans had to swallow in the enactment of this bargain. And more than a few have cited their concerns about this. (So has Obama's Defense Secretary, Leon Panetta.)
But let's get real. This is how this will work: if the trigger goes off and the Pentagon gets gutted, House Republicans will go to work restoring the funding by whatever means they have at their disposal. Anyone who protests will get tarred as someone who is "not serious about protecting America from the terrorists" or some nonsense like that. If things stay true to form, the Democrats will panic and the cuts will get reversed.
But the real problem isn't what happens down the line, it's what happens when the trigger goes off. President Barack Obama will be on the hook for endorsing the defense cuts in the trigger. He'll be blamed for gutting defense.
So, from where I sit, there are actually powerful incentives for the GOP to not play ball. I believe that they'd welcome the trigger.
That brings me to a different question. I know you hate talking about the horse-race side of this, but who do you think won the debt ceiling debate?
It's not that I don't like talking about it, it's just that you don't need to dither around with any mystical political bullshit. The answer to the question, "Who won?" is "The GOP, unambiguously, full stop." I don't believe that the GOP was forced to accept any terms that they didn't like in this deal, for the simple reason that they didn't have to! They held all the leverage, they dictated the terms. I think you're kidding yourself if you think the GOP is worried about the trigger. This deal aligns with their priorities and positions, straight up and down.
This isn't limited to the deal itself. This whole episode has underscored an idea that's central to the GOP's governing philosophy -- government just doesn't work. It takes triggers, and committees and hostage taking to get anything done. Had deficit reduction come about in a reasonable manner, the GOP would have been a big loser. They exist to prove that government is inherently dysfunctional.
But we can at least say that the Tea Party failed, right?
Can we? Sure, of the Republican members of Congress who voted against the deal, you're going to see a strong intersection with Tea Party identity. But while the Tea Party didn't get everything they would have liked, their victory is nevertheless clear. It used to be unthinkable that lawmakers could get away with threatening to blow up the world economy for the sake of getting some spending cuts. The Tea Party's gravitational pull has made this the new, moderate, reasonable position. And in fact, Senator Mitch McConnell, who's knocked heads with a few Tea Partyers in his own caucus, has made this change perfectly clear: "In the future, any president, this one or another one, when they request us to raise the debt ceiling, it will not be clean anymore."
So, we should expect more standoffs like this one?
A better way of looking at things is that on those rare occasions where there isn't some massive episode of hostage-taking, we'll be able to count ourselves as lucky. The hostage-taking tactic is now permanently enshrined.
So where's the next hostage situation likely to take place?
Could be any number of venues. Debate over the gas tax. Policy riders. Per McConnell's promise, certainly the next time there's a need to raise the debt ceiling. Anytime a government shutdown is possible.
But isn't there a cost if the GOP keeps doing this? What if the Democrats turn the tables on a future GOP president?
I've given that matter a lot of thought. Much of the government's functionality has eroded over the past few years because of a parliamentary tactic arms race between the two parties. One side filibusters the crap out of the other when they're up, and the other side returns the favor when the majority flips. At those moments, the angel on my shoulder pleads for good governance. But I'll admit that the devil on the other shoulder relishes it when the other side gets a turn with cricket bat, and adores the long arc at the face of the guy who wielded it last. I think that in the halls of power, there are a lot of people who heed the devil on their shoulder.
But when we're talking about filibusters or secret holds, keep in mind that we're talking about things that are arguably enshrined parliamentary traditions in which members are allowed to indulge. This debt ceiling ransoming is a thing apart. Joe Biden likened it to terrorism. Having called it that, it seems a pretty tough hang for Democrats to threaten a future Republican president with the same tactics.
Certainly there will be some who advocate for a little of the ol' turnabout-is-fair-play. You'll definitely see bloggers begging for it. But in the end, remember, it's bad for the country. And the Democrats are uniquely invested in demonstrating the virtues of governmental institutions. It really would be going to the dark side.
So the short answer is that we won't know until the shoe is on the other foot, but I strongly suspect that the Dems won't indulge in hostage taking of their own. Nancy Pelosi, for her part, says she won't consider it. And despite McConnell's statement, I doubt that a GOP majority will trouble a chief executive of their own with such threats. But if the Democrats play that card, you can count on the GOP to stamp their feet and complain, as if they hadn't resorted to similar tactics.
What impact will this debt deal have on the unemployment crisis?
We've saved the best question for last. The nation's unemployed didn't get anything out of the debt deal, except for a weakened bargaining position and a significant reduction in leverage for any lawmakers who want to help end the unemployment crisis.
That's what passes for good news! Tim Geithner, in the pages of the Washington Post Wednesday, promises the umpteenth "pivot to jobs." But what is he offering? Little more than a promise that the jagged little pill the American people will now have to swallow may have medicinal side effects.
As for the White House, Robert Reich runs down the weak sauce: Obama's got no room to extend tax cuts on the middle class, no ability to create a "WPA or Civilian Conservation Corps" type of jobs program, no way of unburdening cash-strapped state governments, and an infrastructure bank that's a non-starter unless it's a fully private concern -- with working class laborers building toll roads and "user-fee" services that benefit the affluent.
The Federal Reserve? No-go:
The basic challenge for the Fed is this: It is charged by Congress with maintaining stable prices and maximum employment. But when those goals are in conflict with each other, that makes it hard to decide what to do. And right now, the nation seems to be losing ground on jobs, adding them too slowly to reduce unemployment. Yet prices are rising at about the 2 percent or so annual pace that the Fed considers to be stable. Anything the Fed does to try to address the weak job market may well cause inflation to rise above its leaders' comfort level.
The Economic Policy Institute, a top nonpartisan think tank, estimates that the deal struck this weekend to raise the nation's debt limit will end up costing the economy 1.8 million jobs by 2012.
The agreement would reduce spending by at least $1 trillion over 10 years, but even the near-term cuts could shrink already sluggish GDP growth by 0.3% in 2012. According to EPI, the plan "not only erodes funding for public investments and safety-net spending, but also misses an important opportunity to address the lack of jobs." In particular, the immediate spending cuts and the "failure to continue two key supports to the economy (the payroll tax holiday and emergency unemployment benefits for the long term unemployed) could lead to roughly 1.8 million fewer jobs in 2012."
In short, the deal wrought as a part of putting a stop to the insane hostage-taking both exacerbates the unemployment problem and cripples the chances of reversing the downward trend.
The people who forced this deal on the American people now own the unemployment crisis. But that will be cold comfort to ordinary Americans, I'm afraid.