A Bad Debt Deal, But It Could Have Been Worse

Welcome to the Monday Morning Quarterback Club. We’ve got lots of members rehashing the weekend debt ceiling game — players as well as spectators like yours truly.

The White House is celebrating a bipartisan deal that it claims is a win for both “the economy and budget discipline.”

House Speaker John Boehner says “it’s not the greatest deal in the world,” but there’s nothing in it that violates our [right-wing Republican] principles.”

The pundits generally agree with Boehner that it’s not the deal one would have wanted. Beyond that, they diverge dramatically. Washington Post blogger Ezra Klein provides a good sample — and a smart assessment.

The deal, he says, represents “the lowest-common denominator.” No entitlement cuts, no tax increases, no stimulus spending and no infrastructure investments.

Actually, there’s not much of anything specific, except for targets and process. Which makes it very much like the balanced budget amendment the deal commits Congress to vote on.

Big dollar figures. Percent cuts for this and that. Very little that enables anyone to fault the President or members of Congress for their choices about program-specific spending.

By and large, I agree with many of the less ferociously angry analysts and advocates on the left. It’s a bad deal, but not as bad as it could have been. And not nearly as bad as no deal at all.

It’s a bad deal because there’s no balance between spending cuts and revenue raisers — though that was rightly a key item for the Democrats.

Not so bad as it could have been because, Boehner notwithstanding, the bipartisan Congressional committee that’s been charged with figuring out how to get to the bigger of the two deficit reduction targets could, in theory, propose new taxes and/or other tax code reforms that would reap more revenues.

It’s a bad deal because it requires spending cuts when the economy actually needs another infusion of stimulus spending.

New figures show the economy has all but stopped growing. Economists say that’s largely because consumers aren’t buying enough.

Federal spending cuts will inevitably throw more people out of work. And jobless workers and their families don’t go on shopping sprees. Nor others who feel justifiably anxious about future paychecks.

To make matters worse, the deal doesn’t provide for an extension of long-term unemployment benefits — something many hoped the White House could get into the package. A top-rated stimulus left for another, doubtful day. A growing gap in the safety net meanwhile.

The deal is not as bad as it could have been because the first round of cuts will be small, relative to the total deficit reduction targets. Also not so bad because a significant portion will have to come from defense — meaning that programs for low and moderate-income people won’t bear the entire brunt.

It’s a bad deal because it puts these programs at high risk.

Congress has to come up with about $900 billion in savings and then an additional $1.5 trillion.

That second target will almost certainly mean deeper cuts in non-defense spending of the kind Congress must approve on an annual basis, e.g., aid to public education, job training, targeted nutrition programs, or big cuts in mandatory spending for entitlements like Social Security, Medicaid, Medicare and food stamps.

The deal is not so bad because the programs for seniors and low-income people of all ages would be protected from the automatic spending cuts that will kick in if Congress doesn’t act. Well, almost. Medicare provider rates would be cut, but benefits couldn’t be.

Last but not least, the deal is not so bad because the alternative would have been no hike in the debt ceiling at all.

No one knows what this would have meant for our economy and all of us hapless spectators. Surely a spike in unemployment and a halt to monthly disbursements for veterans’ benefits, Social Security, food stamps and the like.

Either that or a Constitutional crisis if the President decided, as some advised, to just direct Treasury to pay our government’s bills anyway. Hard to believe our floundering economy wouldn’t have totally tanked.

A good bit of the Monday morning quarterbacking has involved what the President could have done to get the debt ceiling raised without such collateral damage.

He’s roundly faulted for not being tough enough. I myself have felt frustrated to see him shift so far to the right that he would actually, as in the White House statement, laud a rollback in non-defense discretionary spending to a level last seen under President Eisenhower.

But I’m inclined to agree with former White House economist Jared Bernstein’s view that “lousy negotiating skills” had little to do with the outcome.

The President and Democrats in Congress had to deal with the fact that a significant number of House Republicans were willing — some even eager — to see the economy plunge off a cliff.

There are times when you’ve got to pay the ransom to save the hostage. I think this was one of them.

I take some comfort in knowing that whatever dreadful deficit reduction plan this Congress passes can be undone by future Congresses.

In short, we live to fight another day. And fight we truly must.


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