In Defense of the Debt Ceiling Deal
So, the debt deal. Basically, it's a small increase in the debt ceiling, and a small basket of spending cuts, combined with a large future increase in the debt ceiling, and a larger round of future . . . something. The CBO's description:
- Establish caps on discretionary spending through 2021;
- Allow for certain amounts of additional spending for "program integrity" initiatives aimed at reducing the amount of improper benefit payments;
- Make changes to the Pell Grant and student loan programs;
- Require that the House of Representatives and the Senate vote on a joint resolution proposing a balanced budget amendment to the Constitution;
- Establish a procedure to increase the debt limit by $400 billion initially and procedures that would allow the limit to be raised further in two additional steps, for a cumulative increase of between $2.1 trillion and $2.4 trillion;
- Reinstate and modify certain budget process rules;
- Create a Congressional Joint Select Committee on Deficit Reduction to propose further deficit reduction, with a stated goal of achieving at least $1.5 trillion in budgetary savings over 10 years; and
- Establish automatic procedures for reducing spending by as much as $1.2 trillion if legislation originating with the new joint select committee does not achieve such savings.
Full disclosure: I want this deal to pass. I want any deal to pass unless it actually involves human sacrifice. All taxes, all spending, clean bill--whatever. As long as raises the debt ceiling. If it does some deficit reduction, even better, but not strictly necessary. I am mad at Republicans who are refusing to vote for it. I am mad at Democrats who are doing same. And no, "We cannot, under any circumstances, hand the GOP a political win" is no better a reason for shutting down the government than "We cannot, under any circumstances, raise taxes."
But that aside, this is, to my mind, a pretty decent bill. It could certainly be better--among other things, why focus cuts on discretionary spending? But it's roughly balanced between Democratic and Republican spending priorities, and while one can question whether the future cuts will really happen, they seem more likely to happen than if we'd just passed a clean debt ceiling bill. So, much better than nothing.
The Democratic complaints that we had to settle for cuts in military spending, rather than tax hikes, seems very strange to me. Is raising taxes an affirmative goal, rather than an unfortunate necessity? Why is it somehow worse to get the money out of defense spending cuts--of which progressives are supposed to be fond?--then from the tax hikes of which they are also fond? Personally, if we could avoid raising taxes by cutting the military 100%, I'd be ecstatic. I don't actually think that would be prudent, of course, so in practice I'd oppose. But I don't hear progressives making the argument that cutting the military will leave us dangerously undefended. So I'm confused about what the beef is.
Likewise, the plaints that this is going to tank the economy are wildly overblown. As Josh Barro points out, the cuts are heavily backloaded. The cuts in 2012 are $22 billion, or a little more than a tenth of one percent of GDP. You have to start assuming very high multipliers indeed to think that there will be any impact indistinguishable from statistical noise in the economic data.
The deal does not go nearly far enough towards resolving our real fiscal problems: the growing burden of entitlements, and an inefficient tax system loaded with distortionary tax preferences. On the other hand, I don't think there was ever much chance that it was going to. Deficit reduction and fiscal reform are not going to occur overnight. It is going to be a series of painful confrontations and unpleasant choices. This is a decent start.
That said, while I'm basically pleased with the deal, I am not pleased by the way the GOP got us here. Holding the debt ceiling hostage has threatened our credit rating, and further eroded the already dangerously frayed institutional bonds that keep Washington running. I know, I know--you don't want Washington to keep running. But if history is any guide, the Democrats are going to eventually retaliate with something even more extreme--and then the very people saying they despise collegiality and business as usual will be found in my inbox and my comments section, moaning that this unprecedented breach of tradition is the End of Democracy. And I warn you now, I am apt to be very peeved with those people.