The Debt Deal: Winners & Losers
After weeks of protracted, often difficult negotiations the debt ceiling deal is done.
Whatever the economic impact of the deal -- Moody’s, it should be noted, announced shortly after the deal became law that they too were not happy but that they would not be lifting America’s triple-A bond rating as yet -- the political ramifications are considerable.
No one got everything they wanted -- least of all President Barack Obama. The legislative package that passed the Senate Tuesday nonetheless represents a sea change in the way Washington handles the people’s business, proving once and for all that deficit reduction can be accomplished through spending cuts alone and that the demands for new revenue are a political calculation rather than an economic one.
As is usually the case in such events, there are both winners and losers -- including the country, which is both winner and loser because, though the crisis is averted for the moment, the weight of the national debt still hangs over the nation like a falling anvil in a Road Runner cartoon.
The biggest loser is probably President Barack Obama, whose leadership during the crisis has been non-existent.
Obama began by hectoring the Republicans in Congress with an initial demand that the increase in the debt limit be clean, unencumbered by additional requirements.
That idea went nowhere, and not just the Republicans in Congress opposed it. When it was put to a vote it failed on a bipartisan basis.
The president also wanted any deal to include so-called revenue enhancements, which is Washington-speak for tax increases. Again he failed to get what he wanted, putting his hopes for a tax hike on the report of the congressional “super committee” that will, by Thanksgiving, have to issue a set of recommendations on how best to achieve the remainder of the deficit reduction the plan he signed into law Tuesday calls for.
Politically, the deal puts him in a bad light with the left wing of his own party, which has been fairly brutal in its criticisms of the deal.
An unnamed senior Senate Democratic aide was quoted by the Washington Post as saying, “When you look at the merging details, spending cuts and triggers with no revenue, the president got rolled.”
Writing in the Wall Street Journal, economist Stephen Moore said, “Liberals are furious with President Obama for agreeing to the debt ceiling deal with Republicans. The deal would cut about $900 billion in spending over the next 10 years automatically, and as much $1.5 trillion more through a special committee's recommendations later in the year.”
This is not the deal the president had in mind in January, shortly after Congress passed and he signed into law an extension of the Bush tax cuts and began to focus on the need to raise the federal debt ceiling.
The big winners in all this are congressional conservatives who, from a position of weakness, slowly and deliberately took control of the debate.
They began by developing through the conservative House Republican Study Committee the plan that came to be known as “Cut, Cap and Balance,” which, at the onset, few thought had the chance to be taken seriously.
Not only was it taken seriously, “Cut, Cap and Balance” became the cornerstone of the GOP negotiating position and actually passed, narrowly and on a bipartisan basis, through the House before it was stopped in the Senate by Majority Leader Harry Reid of Nevada.
Not everyone who backed “Cut, Cap and Balance” liked the final deal either. Indeed many of its strongest supporters in the Senate voted against the final package, but their imprint on it is undeniable.
It has been a nasty and bloody fight, one of the worst in recent memory. Its outcome leaves the president in a weaker position and congressional conservatives in a stronger one than either of them were in when the debate began. How it will all play out over the coming months is uncertain but, with a presidential election just about a year away, the president has far less room for mistakes -- and in which to further alienate his base of support -- than the Republicans do.