Bandaging a Paper Cut While Ignoring the Sucking Chest Wound

Some people might see the debt limit deal as a watered-down version of Cut, Cap & Balance. After all, the very first page of the PDF file sent from House Speaker John Boehner describes the “three main features” of initial framework of the deal as follows:

  1. cuts government spending more than it increases the debt limit;
  2. implements spending caps to restrain future spending;
  3. advances the cause of a Balanced Budget Amendment.

I am not one of those people. What I see so far, from the details which have been available, is a compromise made by a party that could have dealt from an unlikely but pronounced position of strength but was instead incapable of understanding the nature and level of support for such action across America. Earlier in this debate, I said that I wanted two things in a successful debt limit solution: either (1) a long-term fix such as the spending caps proposed by Mike Pence and Jeb Hensarling in 2009 or a Balanced Budget Amendment like that which was in Cut, Cap & Balance and the third incarnation of John Boehner’s debt bill, or (2) a short-term fix which made significant cuts and featured a guarantee that the debate would be revisited before the 2012 presidential election.

From the looks of things, I got neither. From both Speaker Boehner’s PowerPoint PDF and various sources around the Web, including a very informative Associated Press piece, here is my attempt at summarizing the complicated manner in which this deal came about:

Round One

A Congressional Budget Office-certified $917 billion in spending cuts are included in the compromise, along with a permitted $900 billion increase in the debt ceiling. While it sounds lovely and certainly reflects the hopes of many conservatives as expressed over the past few weeks, the $900 billion increase in borrowing power will get the United States of America through February 2012, while the $917 billion in spending cuts will be spread out over ten years, with a possible total amount of first-year cuts as low as $6 billion.

That’s the function equivalent of requesting a $10,000 balance increase on your favorite credit card, and then handing it to your spendthrift teenage daughter — that extra $10,000 in borrowing power will be maxed out almost immediately, but you’ll be paying it off for the next five years. And, while the PowerPoint notes that before the debt ceiling can be raised again, Congress and the president “must enact spending cuts of a larger amount first,” if we keep allowing us to compile in six months debt that takes ten years to pay off, we’re going to sink even faster than we are now. It makes no sense.

Folks, the budget proposal put forth by Republicans in April 2011–Rep. Paul Ryan’s Path to Prosperity–contained approximately $3.529 trillion in spending for 2011. At 365 days in a year, that works out to be roughly $9.67 billion spent each day. Even if the $917 billion were spread evenly and every budget for the next decade were $91.7 billion less, that $91.7 billion translates into less than ten days of governance. At $9.67 billion per day, that means that the federal government is still spending $3.307 trillion for the remaining 342 days out of every year. And that’s Paul Ryan’s plan — in other words, wishful thinking.

Even worse, the PowerPoint specifically notes that the “baseline” is to be current law. While Speaker Boehner argues that making the baseline current law effectively makes it impossible for the Joint Committee proposed by the deal to raise taxes, the fact that we are still engaging in”baseline budgeting”–using current expenditures as a means by which future spending may be estimated–means that by default the federal budget will grow by six or seven percent.

In other words, say for a moment that whatever compromise that the parties came up with cut three percent from the budget, across-the-board. Because of baseline budgeting, instead of amounting to a three percent spending cut, in reality we would see a three percent increase, as the proposed hypothetical cut would merely count against the automatic increases intrinsic in baseline budgeting. For a great piece on the scourge that is baseline budgeting, check out a great piece over at Intellectual Conservative, appropriately entitled The Deception of Baseline Budgeting.

Furthermore, the PowerPoint mentions “spending caps that would set clear limits on future spending and serve as barrier against government expansion while economy grows,” and notes that the failure to keep below these caps would trigger across-the-board spending, I see none of the specifics that we saw in similar provisions in Cut, Cap & Balance. What I want to see is that future spending is capped at 18-20 percent of GDP, like in Cut, Cap & Balance, and that said caps are binding on future Congresses. Otherwise, without those guarantees, what I see here are just words. We promise that we won’t spend as much … honest. Not good enough for me.

Round Two

What Washington needs is another committee, right? Well, like it or not, the deal currently on the table would provide for a brand new “super-committee,” apparently nicknamed the “Joint Committee,” named that way because that’s what people who think a new committee is a good idea must be smoking. The Joint Committee would consist of a dozen congressional leaders from both chambers and both houses, nominated by the heads of each party in each chamber.

The Joint Committee would be charged with finding, by November 23, 2011, at least $1.5 trillion in deficit cuts. At that time, the president could be granted authority to increase the debt ceiling by another $1.5 trillion if one of two things take place: (1) if $1.5 trillion in deficit cuts are found and are put into place within the following month, or (2) if Congress votes to send a Balanced Budget Amendment to the individual states. You know how much I like the Balanced Budget Amendment and, frankly, the opportunity to spend another $1.5 trillion might provide adequate incentive for Democratic Party support.

If the Joint Committee cannot find, agree upon, and put into place $1.2 trillion of the $1.5 trillion in deficit reduction sought, then another round of across-the-board cuts (the PowerPoint presentation refers to it as “sequestration”) kicks in, the president would still be permitted to authorize a $1.2 trillion increase in the debt ceiling, but any increase would be accompanied by greater cuts. Those cuts would apply to FY 2013-2021, and would be split evenly between defense and non-defense programs. Certain provisions of entitlements and military compensation would be spared.

Frankly, it seems to me that the more complicated things are, the less likely we’ll see follow-through. Furthermore, while those in favor of this plan seem to like to highlight that there are no tax increases, I wonder whether or not the Joint Committee will see that “new revenues” are the only way to find $1.5 trillion in deficit reduction. The Bush tax cuts are set to expire shortly after the next election, after all, and a number of folks on Twitter have pointed out that the White House’s summary of the debt limit deal references “shared sacrifice” in a number of spots. An excerpt:

The President did not agree to any entitlement reforms outside of the context of a bipartisan committee process where tax reform will be on the table and the President will insist on shared sacrifice from the most well-off and those with the most indefensible tax breaks.

The discretionary savings are spread between both domestic and defense spending. And the President will demand that the Committee pursue a balanced deficit reduction package, where any entitlement reforms are coupled with revenue-raising tax reform that asks for the most fortunate Americans to sacrifice.

I don’t know about you, but it really sounds to me like Speaker Boehner may be a little overconfident when it comes to touting the lack of tax increases in the deal he negotiated with the president and the Democrats.

I know it seems odd to say, considering that the Republicans control only one-half of one-third of our federal government, but I feel as though the GOP was too quick to acquiesce to the Democrats and far too hasty to yield what amounted to a true position of strength. Had the GOP just stood fast and hard behind Cut, Cap & Balance, for example, the coming purported default could have been placed squarely in the laps of the Democrats.

Face it — the Republican Party proposed five plans to solve the debt problem and passed two of them through the House of Representatives. The Democrats tabled both House-passed bills, and have gone 822 days since they’ve even passed a budget. Who, exactly, is the “party of no?” Who, exactly, is standing in the way of fiscal responsibility? In my opinion, effective outreach by the GOP could have forced the Democrats to admit that they have not proposed anything substantive, not to mention forcing them to come out staunchly in favor of higher taxes, higher debt, and possible default. I’ve been in enough arguments to understand that a win comes the very second that you’ve been able to get your opponent to argue your point for you.

Furthermore, it doesn’t take a math genius to understand that this deal doesn’t even come close to addressing the systemic problem that brought us to our current predicament. So long as we were not going to do enough to actually begin turning this rudderless ship around, we might as well have used the purported default as the leverage necessary to enact true, lasting, binding reform.

I fear that all we have done here is tend to the paper cut on our finger while our sucking chest wound remains unchanged. Still, all hope is not lost — for years, the debt ceiling has been raised by Democrats and Republicans alike without so much as a single mention on the nightly news. This fight was epic, and the reason that we are having this fight at all is very simple: the Tea Party.

Looking at the nature and extent of the GOP’s compromise, it’s easy to be depressed. Looking at the discussion as a whole and at the big overall picture, however, and things are indeed moving in the right direction. We need to win in 2012, and hold the GOP’s feet to the fire when it comes to the true, lasting, binding reforms that will make all the difference.

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Comments

  1. Jenna says:

    Ahhhh…thank you again, Jeff, for concisely explaining the mess. :) I always appreciate you making sense of things in ways anyone can understand.

  2. Dee says:

    I don’t understand why we are raising the debt ceiling at all. The problem is the out of control spending and by raising the debt ceiling we just provide more money to spend. I say Stop the Spending!!. When I read all those itty bitty million or billion dollar projects that are added to bills and are nonsense, I bet if all those were cut, we could come up with a few extra dollars. I never believe promises that government makes for the future. In our county we are still paying a “temporary” tax to fund the stadiums that the people voted against. In our state, Pennsylvania, we are still paying taxes for the 1938 Johnstown Flood everytime we buy a bottle of wine or alcohol. Johnstown’s streets are now apparently made of gold.
    Thank you, Jeff, for all your work.

  3. Anonymous says:

    America now sucks.

  4. whats_up says:

    @Dee,

    Raising the debt limit doesnt allow more spending. It allows us to pay the bills we allready owe. No new spending was included, this is for bills that Congress allready voted for, that is why it is so important to pay them. Also calling it a “spending problem” is a nice slogan but not accurate. Revenues are at historic lows, to pull out of this recession we need them to be higher. There are many ways to get there, however the GOP instance on not closing tax loopholes is not helping very much, especially since they are the party claiming that they want to change the tax code. The question is do they want to change the tax code or not? Cant have it both ways.

  5. Dee says:

    whats_up, good to hear from you again. Why do you think revenues are low? There are so many unemployed who are no longer earning wages and therefore, not paying taxes. Employers have been hesitant to hire not knowing what this administration plans to do. Both parties are guilty of “paybacks” to various lobbyists. I agree the tax code needs to be revised. No one has the guts to attack the tax code or the entitlements that need to be revisited. I still think that cutting handouts to nonsensical programs (i.e., tunnels for turtles, shrimp on treadmills, studying the size of penises of homosexual men) would save millions. How do the results of such programs help anyone? We have the bills because we spent. Other countries whose debt came close to the GDP have regained strength by cutting spending and holding that limit for more than a year.
    Always nice to debate with you.

Trackbacks

  1. [...] the way: I touched upon the likelihood of tax increases as part of the debt deal HERE.  Look for more on that later, though admittedly any work at AR is at the mercy of some work [...]

  2. [...] On August 1, 2011, I pointed out that the GOP developed and proposed five different plans to solve the debt problem and actually passed two of them through the House, putting the ball squarely in the court of Senate Democrats, who proceeded to table both bills.  “Who, exactly, is the party of ‘no’?” I asked.  “Who, exactly, is standing in the way of fiscal responsibility?”  Effective outreach by Republicans, I argued, could have forced the Democrats to admit that they had not proposed anything substantive, and in the process would have forced them to come out staunchly in favor of higher taxes, higher debt, and inevitable default. As an attorney, I understood and understand now that a win comes the very second that you’ve been able to get your opponent to argue your point for you. [...]

  3. [...] On August 1, 2011, I pointed out that the GOP developed and proposed five different plans to solve the debt problem and actually passed two of them through the House, putting the ball squarely in the court of Senate Democrats, who proceeded to table both bills.  “Who, exactly, is the party of ‘no’?” I asked.  “Who, exactly, is standing in the way of fiscal responsibility?”  Effective outreach by Republicans, I argued, could have forced the Democrats to admit that they had not proposed anything substantive, and in the process would have forced them to come out staunchly in favor of higher taxes, higher debt, and inevitable default. As an attorney, I understood and understand now that a win comes the very second that you’ve been able to get your opponent to argue your point for you. [...]

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