Examining The Debt Deal

Sen. Harry Reid, President Obama, and Congressman Boehner. Image from http://www.cfnews13.com/article/news/2011/july/288193/Debt-deal-near-Majority-Leader-Reid-OKs-new-plan-pending-Democratic-caucus-approval

Last night, I was very angry about this deal. I felt that it didn’t represent a true compromise that President Obama and the majority of the American people demanded. Today, I’m less reactionary, and more interested in examining the pros and cons of the deal, and who wins and loses. First, let’s examine the meat of the deal.

1. $2.4 trillion in cuts up front; mainly from reduced spending on the wars and decreased interest on the debt.

2. A 12 member bipartisan fiscal commission to determine another $1.5 trillion of cuts.

3. An extension of the debt ceiling through the end of 2012.

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4. Triggers; automatic cuts, 50% to defense, 50% to other domestic programs including to Medicare providers, but Social Security is exempted totally.

5. House GOP gets another crack at a balanced budget amendment.

Now, what are the pros and cons?

Pros:

1. Social Security and Medicare beneficiaries keep getting their checks without any changes.

2. Defense cuts are in the deal so we can expect an end to these wars soon.

3. Republicans did not get to bring America down through default as they had wanted.

4. This bipartisan commission will have to put tax revenues on the table or Republican sacred cows will face massive cuts.

5. America’s national debt will come down.

6. Debt ceiling is raised through 2013, which means it won’t be an issue in the 2012 Election.

Cons:

1. Corporations and the wealthy didn’t give up anything. Their tax rate and loopholes remain.

2. Republicans learned that they can hold the country hostage over the debt ceiling to get things they want.

3. The super commission will have broader powers than the entire Congress.

4. The poor and middle class will face cuts to many other programs that benefit them.

So who are the winners and losers?

President Obama will lose right now, but will be a winner later. Progressives, like me, will not be happy that revenues aren’t part of the “compromise” and because of that, the President loses more support from his base. But he will win later because he didn’t allow conservatives to destroy America through default. He also still has a huge bargaining chip when it comes to taxes. He can simply let ALL of the Bush tax cuts expire or he can get a ton of what he wants from Republicans in exchange for extending them including the end to corporate subsidies and the closure of tax loopholes.

Democrats in Congress also lose for now. They will be seen as not having spines and for not standing up to Republicans. But they will win later and should make huge gains in Congress and here is why.

The Tea Party and Republicans get a decent sized victory in all this. They get massive spending cuts and a deal that doesn’t include tax increases on the wealthy. But that victory will turn into a major defeat when they are duly punished in 2012 for holding America hostage on behalf of corporations and the rich. The Tea Party is also a loser in this deal, because they didn’t get the big prizes they were after. They wanted a default and an economic calamity and they didn’t get this wish. They also wanted a balanced budget amendment and while they do get another crack at it, it won’t be as part of this deal and will go down in defeat in a clean vote later this year. They also didn’t get Social Security, Medicaid, and Medicare cuts. The Tea Party really is the biggest political loser in all of this.

I’m still not happy about this deal. I’m furious about it. I still feel that Democrats gave up too much and have only emboldened Republicans to demand more. The next time the debt ceiling needs to be raised, Republicans will use it as a bargaining chip to get their way. That’s not good for America just as much as a default isn’t. But then again, we may be angry, but at least America avoids default and the Tea Party and Republicans look like a bunch of temper tantrum throwing children while the Democrats and President Obama look like responsible adults. Make no mistake; I still think Democrats should have stood up for what the American people wanted. A balanced deal would have been a true compromise and a better deal. But Republicans weren’t going to budge, and were willing to take America off a cliff rather than compromise. Democrats weren’t willing to jump off that cliff and made the wiser choice, albeit a conciliatory one. Ultimately, Americans will be the final judge in 2012. So, we’ll have to wait till then to see who really wins.