The Debt Ceiling Deal and the Downgrade that Followed Part 1

I didn’t get a chance this week to write about the final debt ceiling deal we got, figuring I’d be able to do it this weekend since I didn’t expect we would get downgraded so quickly. I thought maybe we’d get downgraded eventually if the supercongress or whatever you want to call it failed to do its job in a few months, but I was clearly mistaken. So, let’s take these two topics one at a time, the deal and the downgrade.

My initial view of the deal was that there was no clear winner whatsoever and everybody was a loser. I think it’s a fool’s errand to try to pick winners and losers from here, and it’s much easier, and frankly more accurate, in my view, to say everybody lost. Some lost more, sure, but nobody really won. The downgrade only strengthens my opinion.

The deal hurt the American people first and foremost because, in typical Washington DC fashion, our leadership failed to do anything but put off to another day the effort to solve the problems they’ve created by forming yet another committee. However, this time, they at least did give the committee some teeth in that any measure that comes out of the committee that goes before the rest of Congress is immune from filibuster and amendment and the automatic spending cuts that ensue if they fail to pass a deal (don’t get me started on the fact that much of the automatic cuts come out of the defense budget because, though I could rant about that for a long while, all I’ll say is this is one of the worst ideas to ever get through Washington DC and our elected officials should hang their heads in shame for allowing it).

I understand why they structured it that way, to allow the members to make the ‘hard decisions’ with less fear of political reprisal and to hold a gun to their heads to do a deal. That’s what Washington will tell you, but the real reason is to give the rest of Congress and the White House a certain degree of plausible deniability by being able to say, “I didn’t like [insert aspect here] of the plan, but I couldn’t stop it since I couldn’t filibuster or amend the plan.”

We also lost what little civility we had in political discourse in a bitterly divisive debate, as well. The Democrats called the Tea Party terrorists, among other things. One Republican called Obama a tar baby.

The lack of entitlement reform in the deal hurts the most. Entitlements, particularly Medicare, are the real problem because they are completely unsustainable in their present structure. It’s not like this is a newly discovered problem. Most of us have known for years, if not decades, that this is an existential issues that endangers the survival of our nation. Maybe that’ll come out of the supercongress, but for now, I’m not betting on it.

Politically, both parties did win a little bit. Obama got the largest debt ceiling increase in history and should not have to take this up again before the 2012 election. The Democrats also kept entitlement reform out of this deal. For reasons beyond my comprehension, they continue to put their heads in the sand about this problem and refuse to even acknowledge its existence, much less attempt to address it. The GOP prevented tax increases and exacted a decent amount of spending cuts, though not enough to satisfy S&P. They also got the idea of the balanced budget amendment back in the public eye (again).

Both parties lost more than they gained, however. If Obama had some negotiation savvy, he would’ve tried to fight this debt ceiling battle during the end of 2010, when the GOP was fighting for the extension of the Bush tax rates. He could have leveraged that in exchange for a debt ceiling increase, but he didn’t. Obama also insisted early on that tax increases were needed, but he caved there, too. In a nutshell, Obama looked weak in these negotiations.

On the flip side, the GOP was branded as extremists who would burn the house down to save it. Whether you view that as a good thing or a bad thing, that’s how they looked in these negotiations. The GOP caved on defense spending, which is deplorable as I mentioned before (I know I said I wouldn’t say any more on it, but I’m not sure who is worse here between the Democrats for putting the idea out there or the GOP for agreeing to it).

Tune in tomorrow for part 2, when I discuss the downgrade in greater detail.