It was a terrible process, but a good result.
Now that Congress has reached a compromise to move toward restoring fiscal responsibility, what have we achieved and what challenges remain?
The agreement creates room for the private sector to continue to grow, without the threat of default and the burden of higher interest rates.
What does that mean, “creates room for the private sector to grow”? To the contrary, by virtue of pushing up the debt limit by $2.4 trillion, it creates room for the public sector to continue to borrow money from the American people so that the government will continue for the moment to meet the obligations it has thrust on the taxpayers.
It locks in at least $2 trillion in long-term savings from cuts in government spending, but those savings are phased in gradually to avoid hurting the economy in the near term.
The initial savings, which total roughly $1 trillion over 10 years, require cuts in security programs and savings across the rest of annual discretionary spending. Changes must be made in how government works, and some programs will be scaled back to make room for those that are essential for the future, such as education and innovation.
“[T]o avoid hurting the economy in the near term”: one of the things that even critics of the Democrats and the Administration fail to note is that Obama’s and the Senate’s decision to try to leverage another last-minute, rushed through deal with all the urgency and panic that they could generate was undermined by their own timing. When the adjusted quarterly economic statistics came out, they showed that the economy has virtually stalled–unexpectedly. The President can urge whatever ridiculous analogies he wants–does he really expect anyone to see him as having inherited the kind of mess Reagan did from Carter?–but the combination of “stimulus” spending and “quantitative easing” has amounted to a vast accumulation of debt with no economic benefit, and the markets yesterday reacted to the signing of the debt ceiling agreement by dropping to their lowest levels yet in this tawdry year. Another Recovery Summer wasted.
The agreement sets up a powerful mechanism for agreement on tax reforms to strengthen growth, and entitlement reforms to strengthen programs such as Medicare. A congressional committee with fast-track authority will have a Nov. 23 deadline to recommend a balanced package of long-term reforms to produce $1.5 trillion in additional deficit reduction.
The agreement creates a strong incentive to compromise: If the committee fails to reach agreement or Congress fails to act on the recommendations, government spending will automatically be cut by $1.2 trillion. These across-the-board cuts, evenly weighted between the defense budget and domestic programs, would take effect in 2013.
And why would those cuts take effect in 2013 if agreement can’t be reached by November? Hmmm? Jay Carney said last week that Obama was not playing politics with the debt ceiling. How farcical the White House’s repeated insistence that they actually had a budget plan looked, not only to journalists, but to the Great Unwashed, seems entirely lost on them. Once again, this is transparency, though not of the sort we were promised from this misadministration, and if Jay Carney believes that the White House is winning the political battle, he obviously hasn’t seen the poll numbers.
Leftists have been throwing around the meme that TEA Partiers are terrorists–heck, Harry Reid said that their representation by the officials they elected is unfair to the rest of Americans–when their crime is to have said in effect that they will not be extorted anymore. By ceding the fact that America’s debt problem is unsustainable, Geithner and the Administration acknowledge that what they have been saying all along is true. Now, suddenly, the element of coercion is a positive feature of the legislation. To use the leftist analogy, the balance of threat between gutting entitlements and defense (which Geithner represents as “security”) is like a mutual suicide pact.
These broad, automatic cuts, timed to coincide with the end of the Bush tax cuts, will make it harder for Congress to choose inaction over compromise.
The agreement removes the threat of default and lowers the prospect of using the debt limit as an instrument of coercion. It should not be possible for a small minority to threaten catastrophe if the rest of the government decides not to embrace an extreme agenda of austerity and the dismantling of programs for the elderly and the less fortunate.
Beneath all the bluster, the prospects for compromise on broader and deeper reforms are better than they have been in years. Leading Republicans have begun talking about tax reforms that will raise revenue and help reduce the deficit. Democrats recognize that we have to find savings to preserve programs for the elderly, the middle class and the poor, and to create room to help rebuild the economy.
Note that Geithner is unable to say the Bush “revenue reductions.” Why? Because the tax cuts didn’t equate to a reduction of government revenues, as the Administration would like to have Americans believe.
Still lost in this rhetoric, however, is any acknowledgment that government’s increasing debt on the backs of taxpayers is a form of coercion itself, that the Administration’s massive expansion of the public sector has had consequences for the economy, that the intrusions into markets have created disequilibrium and uncertainty, and that the “stimulus” has been wasteful in the extreme. If ever there was a time for an “extreme agenda of austerity” in American history, certainly this is the time. Cowboy poetry.
Certainly, there are those among the poor and the elderly who rely on government programs, and unfortunately those programs have grown under Obama, due both to initiatives and the faltering economy. But when Americans learn that on average a family of four on full benefits has more discretionary spending power than a family of four earning $50,000 a year, they believe with some justification that perhaps entitlements have gotten out of control. And the outlays, particularly for fuel, have only gotten worse. Obviously, this affects those “working families” that the Democrats like to claim they support more than it does those who sit at receipt of toll collecting benefits. How does the administration react to the rise in fuel prices? Why, by empowering the EPA not only to sock it to Americans for producing CO2, but to make another enormous power grab to regulate ozone as the budget negotiations reach their climax. For pure self-important idiocy, it would be hard to come up with a better example, and the additional costs these regulations impose on industry and energy translate yet again into higher costs for consumers.
The fact is, Americans’ real wages have been declining since 1971, and in that time we have seen a monstrous growth of government and regulation. It is not a coincidence. Even labor unions seem finally to have realized that the growth of the public sector at the expense of the private sector has gotten badly out of control. When AFSCME kicked about the probably effects of the budget deal, the AFL-CIO was notably silent. So much for solidarity. Is the AFL-CIO terroristic for putting the welfare of their rank and file ahead of AFSCME’s? If so, I haven’t heard it . . . yet.
Governing requires the recognition that we do not have unlimited resources. We cannot ask the American people to pay more in taxes without being able to demonstrate that we have found ways to use their taxes more wisely. Nor can we ask Americans to accept changes in Medicare and Medicaid if those savings will be used to pay for tax preferences for the most fortunate few.
Already, some are asking if we cut too much. Others want to know if we did enough about the long-term problem of a rising debt burden.
This agreement is the beginning of restoring fiscal sustainability. It is a substantial down payment, but not the end of the debate. The government’s ability to make smart, long-term budget choices has long been broken. This gives us a chance to fix it.
“We cannot ask Americans to pay more in taxes without being able to demonstrate that we have found ways to use their taxes more wisely.” This really is the key to the whole article. It lacks the two important words, than they, at the end. Wasn’t it just a few weeks ago that Harry Reid was appalled at the idea that Cowboy Poets might lose their funding? Is there anything about the desperate Spend-a-Thon that preceded this bill that would make Americans think that government has been looking for ways to spend revenues more wisely? Have our President and our legislators and the czars and heads of agencies suddenly sobered up? The whining about the TEA Party certainly doesn’t create confidence.
Regarding Medicare and Medicaid, is it true that ObamaCare doesn’t touch those institutions? Here was a guy who thought he had a mandate to change the way America works, fundamentally, but who totemically worships some of the institutions that are in greatest need of change. The contradictions were always there, even if they weren’t recognized. Most fundamentally, Obama’s vision always lacked a rudimentary understanding of the relations between capital and prosperity. The price will be no second term, but the left will never admit it. They cannot, because they don’t want to change, either, and that is why there is no hope for them.
Geithner is right to say that this is just the beginning. Among career politicians and their media enablers, responsibility is a bleak proposition. They hates the Hobbitses, with their Constitutionses. They hates it that they have risen up and demanded something of them. They hates it that their prerogatives have been impeded and that suddenly they are shackled with the burden of having to determine priorities and make choices. They don’t want to change, and that is why we need to continue to ratchet up the pressure. By government, Geithner would like for us to understand Congress; unfortunately for Obama, his record there does nothing to exonerate him.
The near-term cuts in spending will not materially add to the pressures on the economy. The direct effects of the cuts — using estimates by Macroeconomic Advisors — are about one-tenth of one percentage point of annual GDP growth, far less than the damage that would have been caused by a prolonged impasse, by adopting the budget proposed by Republicans or, certainly, by default.
And by locking in long-term savings, Congress will have more room in the fall to pass additional short-term measures to strengthen the economy — such as extending the payroll tax cut, which provides an average of a thousand dollars to the after-tax incomes of working Americans; extending unemployment benefits; and financing infrastructure investments. After all, strengthening growth and putting more Americans back to work are among the most important things we can do to improve our fiscal situation today and over the long term.
This week, I spoke to business leaders across the country. Not surprisingly, their relief that Congress has finally acted was tempered by concern about the damage caused to confidence by the months-long spectacle of threats of default. These business leaders, like many Americans, want to see Congress build on this moment of compromise.
It is not enough for Congress to have prevented a disaster it brought on itself. Lawmakers should return in September prepared to act to strengthen the economy and get more Americans back to work. Doing so will help repair the damage this fractious debate inflicted on an economy that was already slowing, not just here but around the world.
Jobs. Finally, they start talking about jobs. It’s a little late in the game, and they still think that there’s merit in the top-down approach, obviously. If they hadn’t been such egregious putzes, there would be no need to extend unemployment benefits yet again, because the private sector creates the prosperity that the public sector requires. Bobby Reich can talk all he wants about how necessary it is to keep on priming the pump, but when you’ve disconnected the battery and are taking whacks on the engine block with a sledgehammer, you’re doing it wrong. ‘Scuse me while I get a Slurpee.
And here we see the specific blaming of Congress, as opposed to the Administration. Well, Congress deserves its share of the blame, but the President, if he had been doing his job, would have been demanding two and a half years ago that his own party put a budget on his desk. He didn’t. His plan was no plan. Nice try, Timmy, but he deserves a great deal of the blame, and I intend to see that he gets it.
- Excited
- Angry
- Not as Angry
- Bored
- Indifferent
- Sad
