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The Last Debt Ceiling Hurdle
Posted By Arnold Ahlert On August 2, 2011 @ 12:23 am In Daily Mailer,FrontPage | 25 Comments
The House vote on raising the debt ceiling was far less dramatic than advertised, save for the return of Rep. Gabrielle Giffords who cast a “yes” vote. The package sailed through by a 269-161 margin. Ninety-five Democrats joined 174 Republicans in favor of the plan, while 66 Republicans joined 95 Democrats in voting no. “We’re coming up to a deadline we all must recognize: default,” said Representative Paul Ryan (R-WI). “Both parties got us in this mess; both parties are going to have to work together to get us out.”
Yet even before the debt ceiling deal was finalized, there was more than enough rancor to go around. Far-left New York Times columnist Paul Krugman concluded that “extortion works” and that the terms of the agreement “amount to an abject surrender on the part of the president.” Tea Party founder Mark Meckler was equally upset. “None of the budget plans proposed have real cuts in them–only promises to cut,” he said. “The reality is…these promises are actually a lie.” The Daily Beast’s Peter Beinart claims the “Tea Party is now running Washington,” even as Tea Party-favored presidential candidate Michele Bachmann believes the deal “is like saying we embrace Greece.” Apparently the current definition of compromise in Washington, D.C. is something that makes both sides miserable — and childish.
Yet Democrats seemed to grab the edge when it came to histrionics. Vice President Joe Biden accused Tea Party Republicans of having “acted like terrorists” during the negotiations. Rep. Mike Doyle (D-PA) echoed that sentiment. “This small group of terrorists have made it impossible to spend any money,” he told colleagues at a closed-door Democratic Caucus meeting.
What makes Democrats so unhappy? Certainly the devil is in the details, but the bigger picture is that the national conversation has been altered. And while it is convenient to blame Tea Partiers for that change, there is a level of denial on the part of Democrats that borders on breathtaking. A lot of Americans, far from blaming the Tea Party for the debt ceiling deal, are giving them credit for it. Perhaps Mr. Biden and his fellow Democrats would like to pretend that the only election which occurred in the last three years was the one in 2008, but that is simply not the case. Millions of Americans appalled by the reckless spending of an Obama administration and a Democratically-controlled Congress sent Tea Party candidates to Washington in 2010 precisely to put a stop to such fiscal recklessness.
How reckless? The current deal allows for a $2.4 trillion hike in the debt ceiling. That is the largest hike in the history of the nation — and it follows the second largest, a $1.9 trillion increase passed by Congress and signed by President Obama on Feb. 12, 2010. Thus, despite all the venom directed at the Tea Party for forcing the issue, America’s addiction to deficit spending is in dire need of fixing.
Will it be fixed? Rep. Ron Paul explains the illusory nature of government “cuts.” They are “akin to a family ‘saving’ $100,000 in expenses by deciding not to buy a Lamborghini, and instead getting a fully loaded Mercedes, when really their budget dictates that they need to stick with their perfectly serviceable Honda,” he writes. He then gets to sobering reality. “The truth is that frightening rhetoric about default and full faith and credit of the United States is being carelessly thrown around to ram through a bigger budget than ever, in spite of stagnant revenues.”
Those revenues currently stand at $2.2 trillion dollars, which Paul notes was the entire federal budget only seven years ago. “If we simply returned to that year’s spending levels, which would hardly be austere, we would have a balanced budget right now,” he wrote. “If we held the line on spending, and the economy actually did grow as estimated, the budget would balance on its own by 2015 with no cuts whatsoever.”
Question: is Ron Paul a “terrorist”?
As part of this deal, such questions, more or less, will be left to a committee comprised of six Republicans and six Democrats, from each chamber of Congress tasked with finding an additional $1.5 trillion in deficit reductions by Thanksgiving. How they go about making those cuts remains subject to intense speculation. House Speaker John Boehner claims the deal is “all spending cuts,” even as the White House issued a statement Sunday night saying the committee must also consider “revenue-raising tax reform that asks for the most fortunate Americans to sacrifice.” At issue is whether or not the Bush tax cuts will be allowed to expire in 2013. If they are, $3.5 trillion in “revenue” will accrue over ten years absent any action by the committee.
Meanwhile, the three main ratings agencies reminded the nation that even the most stringent results coming from the committee’s deliberations may not be enough. Moody’s Investors Services stated the country would “probably” retain its AAA credit rating for now, but that the outlook for the future was “negative.” Fitch Ratings said its AAA rating depended on debt reaching a “more sustainable level,” while Standard & Poor’s reiterated its contention that $4 trillion must be cut from future budget deficits, or America’s rating will probably be lowered to AA. Guy LeBas, chief fixed income strategist at Janney Montgomery Scott, explained why. “The details [of the deal] don’t look as pretty as the headlines,” he said. LeBas also noted that the agencies will be less than thrilled with the idea that most of the spending cuts won’t kick in until 2013.
Yet some analysts see a silver lining in a lowered credit rating, noting that the higher interest rates resulting from a downgrade to AA would make it more difficult to borrow money. Perhaps it would, at least for consumers. But it might also make interest payments on existing debt far more onerous.
As for the economy itself, yesterday’s news was hardly comforting. U.S. manufacturers had their weakest growth in two years, and MSNBC contended that we are already entering a double dip recession. One suspects millions of Americans don’t believe we ever recovered enough to make the distinction. Either way, good news, like jobs, is in short supply.
The Senate is expected to vote on the plan at noon today. While it is expected to pass, a certain level of bitterness exists in that congressional chamber as well. “I cannot in good conscience support this deal. Simply stated, it locks us into more debt, bigger government and most devastating of all, a weakened defense infrastructure at a time when we face growing threats,” said Lindsey Graham (R-SC). South Carolina’s other senator was equally upset. “I’m not going to tell Americans that we’re doing everything when we’re not,” said Republican Jim DeMint. “We’re planning on adding another $10 trillion in debt.”
Certainly for politicians (especially those seeking re-election), to say they are unhappy with a deal that didn’t completely accrue to their side’s interests, provides far better cover than saying they had to concede on one point or another. Yet aside from the obvious political ambition that always necessitates framing any compromise in terms of “winners” and “losers,” there is a far bigger problem brewing in Washington, D.C. There are always underlying ideological limitations from which every compromise proceeds, but in the hyper-partisanship that currently dominates the nation’s capital, those limitations are becoming more and more constricting. Such constriction leads to frustration, frustration to invective.
On a day where that invective reached fever pitch, it was a pleasure to see Gabrielle Giffords in the House. One would like to think her appearance might give pause to both Joe Biden and Mike Doyle. Perhaps they might even take her statement “that crossing the aisle for the good of the American people is more important than party politics” to heart. There is a monumental amount of work to do to get this country back on track, and there will be many moments of ideological passion along the way. But passion needn’t be accompanied by puerility.
Democrats and Republicans don’t have to get along. But they can behave like grownups. That alone would be a relief to millions of Americans.
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