Dissecting the debt-ceiling/deficit deal
The debt-ceiling and deficit reduction package on which Congress will vote later today “removed the cloud of uncertainty that was over our economy” and paves the way for further, balanced debttt reduction later on, a top White House aide said a few minutes ago.
On a conference call with reporters, David Plouffe – senior advisor and assistant to President Barack Obama – said the bipartisan “supercommittee” this package creates will have until Thanksgiving to come up with a plan that will mix spending cuts with tax reform, possibly including closing corporate tax loopholes and raising taxes on the nation’s wealthiest.
Asked why anyone should believe this panel will succeed in accomplishing what so many others have failed to do – devising a plan that can get enough votes in Congress plus the President’s signature – Plouffe replied that this commission isn’t starting from square one. Its work will be based in part on frameworks already established by the National Commission on Fiscal Responsibility and Reform and in the more recent, direct talks between the President and House Speaker John Boehner.
National Economic Council Director Gene Sperling noted that when the Senate’s “Gang of Six” recently advanced a plan with even more revenue than the President had sought, as many as 15 to 20 Republican senators appeared ready to sign on. Poll show the public wants a balanced approach and experts say it’s the only way to go, Sperling said, so Republicans in both chambers will have to realize they can’t put an undue burden of deficit reduction on the nation’s most vulnerable if they want to see it become law.
But voices at both sides of the political spectrum are crying foul. Lots more on that, after the jump…
Adam Green, cofounder of the national Progressive Change Campaign Committee, noted his group’s website attracted more than 200,000 people pledging to volunteer for and donate to Democrats in 2012 who oppose cuts to Social Security, Medicare and Medicaid; he also noted 87 House Democrats signed a Congressional Progressive Caucus letter opposing such cuts.
“This deal will kill our economy and is an attack on middle-class families,” Green said in a statement issued this morning. “It asks nothing of the rich, will reduce middle-class jobs, and lines up Social Security, Medicare, and Medicaid for cuts. Today, we’re putting in thousands of calls to Congress urging Democrats to keep their promise and oppose this awful bill. The 14th Amendment is unambiguous, and President Obama should invoke it to pay our nation’s debt. Then Democrats should focus on jobs — not cuts — in order to grow our economy.”
Some say this whole thing was an enormous, distracting waste of time.
Dean Baker, co-director of the Center for Economic and Policy Research, issued a statement saying these weeks of negotiations on the debt ceiling and this deal “show what happens when a small minority is allowed to gain control over national debate.
“While polls consistently show that the vast majority of the public sees jobs as the main problem facing the economy, there has been a well-funded crusade to ignore public opinion and make cuts to social insurance programs and other spending the top priority for Congress and the President,” Baker said. “To further this effort, the anti-deficit lobby has been willing to rewrite the history of the downturn and the deficit. The data clearly show that the large deficits of recent years follow from the downturn caused by the collapse of the housing bubble. Prior to the downturn, the deficits projected for 2009 and subsequent years were relatively modest. In fact, even with the tax cuts, the cost of the wars, and the Medicare prescription drug benefit, the debt-to-GDP ratio fell from 2004 through 2007.”
Meanwhile, some conservatives say the deal didn’t go far enough.
“The Boehner-Reid plan, at best, will result in a further increase in the national debt of $7 trillion. It cuts only $6 billion for next year out of a budget that will spend literally over 600 times that, so it’s no wonder it has been widely criticized by fiscal conservatives,” Peter Ferrara, the Heartland Institute’s senior fellow for entitlement and budget policy, said in a statement issued last night.
“These budget debates make no sense because of ‘baseline budgeting,’ which builds in trillions in automatic increases in the budget, and then calls any reduction in that runaway increase a draconian cut in spending,” he said. “The first step on the road to fiscal sanity would involve repealing baseline budgeting so discussions about the federal budget would sound more like discussions about the family budget.”
UPDATE @ 2:27 P.M.: The hour draws nigh, and the outrage continues: Both the liberal National Nurses United, an Oakland-based union 170,000 members strong, and Americans for Limited Government, a Virginia-based conservative group, urge Congress to vote against the deal.
“At a time of the worst economic crisis facing our country in decades, it is disgraceful that Washington continues to ignore the deep pain in Main Street communities across the nation, and instead is pushing a plan for more punishing cuts that will only worsen the crisis,” NNU executive director Rose Ann DeMoro said in a news release. “What this latest deal does is make those who vote for it a full partner in the discredited theory that our economy is in free fall because of public spending on programs that help people, and kicks the can further down the road on real solutions that are needed to promote genuine recovery.”
DeMoro said the President “could avoid this current high wire act by invoking the 14th amendment to raise the debt ceiling, as many have proposed, and start this process over with solutions designed to address the real economic problems facing American families.”
Meanwhile, ALG President Bill Wilson sent a letter to Congress saying the deal “risks an unprecedented credit downgrade of the nation’s vaunted Triple-A credit rating, the continued weakening of the U.S. dollar as the world’s reserve currency, and higher interest rates.”
The $900 billion in spending cuts won’t go far enough to restore the nation’s financial security, he wrote, noting the government projects the economy will nearly double in the next ten years.
“But with anemic growth of 0.4 percent in the first quarter, and 1.3 percent in the second, we are nowhere near that pace,” Wilson wrote. “With assumptions so unrealistic, the mere $900 billion in savings under the bill will be easily erased by the slowing economy and lower-than-expected revenues,” Wilson predicted.
As for the commission this deal would create to pursue further deficit reduction later this year, “(t)he American people elected you to make these decisions, not convene another rigged commission whose findings will never be adopted,” he wrote.