Congratulations to the Tea Party for a great victory. Congratulations to President Obama and Democrats for another brilliantly executed surrender. Condolences to the jobless whose plight will become even worse after this deal. Condolences to the American economy which will be damaged by this deal.
Let's be clear: Speaker Boehner could not deliver enough Republican votes. He was some 40 votes short. At the very moment when Democrats had leverage they still caved and asked for and received nothing in return.
The situation was reminscent of Michael Corleone in The Godfather who said to a senator, "here is my offer: nothing." That is what Republicans said to the president and Democrats, and the president and Democrats responded: we accept, give us nothing.
As one of the more principled Democratic members of the House said, this deal is a "Satan's sandwich" that in my view brings shame to all who were part of it, and will bring more big trouble to the national economy that will be greatly damaged by it.
If I were a member of the House, I would have voted against this destructive deficit deal and proposed the deadline be extended to do it right. Obviously, my view has not prevailed. A number of very senior Democrats in the White House and Congress know my views and rejected them, a position I predict they will deeply regret.
I believe this debt ceiling deal is a profound disaster four reasons, any one of which should have been fatal.
1. It is insane to be cutting spending starting in October 2011, which this deal will do, with growth so low and joblessness so high. I have warned repeatedly against making the "1937 mistake" of cutting spending in a no-growth economy. That is what this deal does. It is an epic economic policy blunder that will make a jobless economy more jobless.
2. The actual deficit cutting in this deal is so weak that it will either trigger a ratings agency downgrade of the U.S. or will discredit rating agencies for now downgrading.
Folks, if they increase the debt ceiling by $2.1 trillion, and cut the deficit by $2.1 trillion, what exactly have they done?
The deal that should have been made would have included spending for the remainder of this year to create jobs, and deficit cutting that would be significantly greater than what is achieved in the bill, that would begin when the economy recovers and continue for the rest of the decade.
3. In this dastardly deal there is not one ounce of sacrifice or contribution by any wealthy individuals, or any of the great conglomerates that currently pay no taxes.
This is a grotesque injustice, inequity and outrage that only increases the massive disparities of wealth in America that are a hallmark of the Obama presidency every bit as much as they were a hallmark of the Bush presidency. By exempting those who can afford to do the most, the deal so destroys the possibility of sufficient deficit reduction that the only question is not if a catastrophic ratings agency downgrade of the U.S. comes, but when.
4. The vice president was told by angry Democrats that Tea Party negotiated like economic terrorists, but those who believe this must agree that the President and Democrats surrendered to economic terrorist tactics.
This business of the president constantly surrendering and appearing to have no first principles he will fight for is destructive to his presidency, destructive to the presidency itself, destructive to policies that would create jobs, destructive to what the Democratic party stands for, and destructive to the remainder of the president's term because he is announcing to the world that he can be rolled every time.
This deal will slow growth, and there is nothing to strengthen growth. For every 1% of GDP, the deficit over 10 years moves by $3 trillion dollars. It is lunacy to pass a bill that slows growth later this year, only increasing the deficit, while cutting spending so modestly that it should, and may, trigger a disastrous downgrade that will wipe out the entire modest deficit cutting the deal claims to achieve.
This deal is negative and destructive for jobs when a jobs program is needed. It is negative and destructive to the serious deficit cutting that is needed in the medium and long term.
I would have voted against this deal. I predict many Democrats and Republicans who voted for it will wish they did, as well. This is a dark day for the Democratic Party. This is a dark day for the American economy.