Sunday, July 31, 2011

Debt Ceiling Deal: Preliminary Observations on the Deal AND Obama

The Washington Post reports that Democrats and Republicans have nearly reached a deal in the ongoing talks to raise the debt ceiling. The WaPo article contains a summary of the tentative agreement:
The emerging agreement calls for raising the $14.3 trillion debt limit by up to $2.4 trillion in two stages, with the debt limit rising unless two-thirds of both chambers of Congress disapprove, according to officials in both parties familiar with the talks. That would extend the Treasury’s borrowing authority into 2013, satisfying President Obama’s demand to avoid another showdown over the issue in the heat of the 2012 presidential campaign.

The first stage would pair an increase of roughly $1 trillion with cuts to government agencies of about the same magnitude over the next decade. In the second stage, a special congressional committee would be created to identify additional savings later this year. The size of those savings would dictate the size of the second debt-limit increase, giving Republicans the dollar-for-dollar matchup they have demanded between spending cuts and the debt-limit increase.

Spending Cuts -- What Spending and What About Tax Increases?

The WaPo article indicates that the budgetary cuts would come exclusively from spending cuts to government agencies. The article, however, does not mention which agencies would receive the bulk of the cuts. Nor does the article indicate any specific cuts to the major ticket items in the federal budget -- defense, Medicare and Medicaid. Social Security is "off-budget," but it definitely contributes to the nation's tax burden, and, according to recent analysis, places a strain on the deficit as well.

Furthermore, the article does not mention that the deal includes any measures that would raise tax revenue. Most economists conclude that tax cuts implemented during the Bush presidency (and extended during the Obama administration) have contributed to the deficit.

Moreover, according to a recent ABC News-Washington Post poll, most of the public, including a majority of Republican voters, favors a mixture of spending cuts and tax increases to resolve the deficit. Indeed, with tax revenue being historically low (a result of tax cuts and the recession) and spending being historically high, the deficit has reached its record level.

Nevertheless, the tentative deal, as summarized by the WaPo, does not contain any measures that would mandate tax increases. A one-sided approach -- especially one that does not focus on the major spending items -- seems doomed to fail. For more on the tax issue, see this follow-up essay on Dissenting Justice.

Obama: Tough or Not?

President Obama has received a lot of criticism for not being tough during negotiations. This crisis provides an occasion to test that claim. During the early phase of the crisis, former President Bill Clinton advised Obama not to blink during the debt crisis. President Clinton endured many battles with Republicans during his presidency over the federal budget.
Republicans favored deep spending cuts and often threatened to "shut down" the government unless they got what they wanted. Clinton always maintained his ground and took the Republicans to the mat.

During those battles, Clinton inevitably emerged with greater public support. Clinton utilized the media to portray his foes as unfair and unreasonable. As a result, the Republicans came across as narrow-minded, unreasonable and selfish. Indeed, these struggles ultimately led to the demise of Newt Gingrich and his famed "Contract With America."

Obama has clearly allowed the crisis to go to the final round -- just as Clinton did during his budget battles. For that, he appears tough in his stance. Obama, however, has become somewhat weak during the final phases of the debt negotiations. Rather than using the media to portray the extremist House Republicans as being outside of the mainstream -- as indicated by opinion polls -- Obama instead has retreated to his comfort zone and has demanded that the parties reach a compromise.

This approach suggests that the battle over the debt ceiling involves a debate among two reasonable and rational parties. All that these parties need to do is reach a consensus. But the Republican approach -- particularly as expressed by members of the House of Representatives -- is far from reasonable. The most questionable aspect of the House Republican approach was the inclusion of a proposed balanced budget amendment to the Constitution. This proposal is a bad idea for many reasons. Furthermore, even if it were a good idea, it had no chance of passing in the Senate. Democrats and many Republicans oppose the measure. But rather than relenting, the House Republicans, who claim to oppose government waste, wasted time by sending a bill to the Senate that included the proposed amendment. The Senate promptly tabled the bill.

Obama has failed to capitalize on behavior like this to portray the more extreme Republicans (primarily Tea Party-backed politicians) as reckless and dangerous. Unlike Clinton, it is unclear whether Obama will emerge from these talks with more public approval. He lost a moment to control the public debate and during the most critical moments of the talks has come across as a mere mediator between two opposing parties.

During his presidential campaign (starting with the Democratic Primaries), Obama promised to build bridges, to end the bickering and nasty politics of Washington, and to act as a conciliator rather than fighter. Indeed, that was a primary narrative that distinguished him from his leading opponent, Hillary Clinton.

This approach won favor with the nation -- especially younger voters who naively believed that it was possible for one person to alter the political culture of the nation. While compromise and consensus have a lot of value in politics, fighting and toughness are also important. It seems unclear whether Obama has the desire or ability to exhibit these latter traits. His desire for compromise will probably provoke a lot of debate for the remainder of his presidency (this term and the next one if that occurs).

Update: The WaPo also reports that the tentative deal would include a future vote on the proposed balanced budget amendment. According to the WaPo, however, "the plan calls only for a vote on such an amendment, not the passage of one.

This is confusing language. It is unclear whether Congress can vote on a constitutional amendment but not send it to the states for ratification if a majority of both houses approves the measure. Also, it is unclear what good this does. The public already knows that House Republicans want the amendment; they already approved it. An empty and meaningless vote in the future would not add to the discussion.

1 comment:

Jay said...

I believe this is the same thing that was done for the budget deal a few months ago. Essentially, the senate has agreed to vote on the measure, even though everyone knows it will never pass. If by some chance it does pass, then I am sure that they will send it to the states, but this will never happen. This House of Representatives appears to enjoy empty votes that are used simply to get official opinions on the record.

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