Sen. Dick Durbin, the liberal lion from Illinois, pronounces the debt deal “the final interment of John Maynard Keynes.”
The burial ceremony should be a nice, simple one after the violence done to the aged economist by the failure of the broad Obama stimulus program. The administration’s serial overpromising in his name did more to discredit Keynes than a century’s worth of broadsides by his intellectual enemies.
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Nearly three years into the Obama administration, the unemployment rate is more than 9 percent, a grassroots movement devoted to cutting government has the upper hand in the House of Representatives, and the debt of the United States could well be downgraded by Standard and Poor’s. If Durbin thought that in these circumstances Keynes was heading anywhere other than a pine box, he hasn’t been paying attention.
The debt deal is austerity designed by committee. It’s late. It’s needlessly complex. It’s inadequate to our challenges and may not prove particularly functional. But it’s austerity. That a Washington with a Democratic Senate and president has to go through the exercise of at least appearing to cut $2.1 trillion from the deficit with no guaranteed tax increases is a humiliating reversal for Keynes’s self-appointed heirs.
Every time Washington has a showdown, pundits and presidential historians gather on TV sets to lament the breakdown of our governing institutions and the end of compromise. But Congress is still perfectly capable of splitting differences. The debt deal gives a little something to all the major players in a jerry-built, two-part increase in the debt limit coupled with an initial $900 billion agreed-upon cut and at least a $1.2 trillion cut TBD.
House speaker John Boehner gets less spending. Senate minority leader Mitch McConnell gets his cute trick of letting Congress disapprove a second debt extension while still giving it to Pres. Barack Obama. Senate majority leader Harry Reid and President Obama get a debt extension past the 2012 election and a special committee that could possibly recommend tax increases.
Washington doesn’t lack for the ability to cut such clever deals; it lacks the collective will to transform the entitlement state. So, it perpetually kicks the job over to a commission. Last year, the Bowles-Simpson commission released a report that President Obama promptly filed away in a drawer in the Resolute Desk. Now, the debt deal creates an all-new special committee to find the unidentified $1.2 trillion second round of cuts.
Realistically, it would have to find them in entitlements. Rarely, though, has a bipartisan committee been so primed for failure. The proposed committee will have 12 members, six from each party. It needs a majority of seven to make a recommendation that goes straight to a vote on the floors of the House and the Senate. Unless either party slips up in one of its appointments, the committee is very likely to deadlock.
As a spur to action, automatic spending cuts equal to $1.2 trillion kick in if the committee fails. The idea is to make these backstop cuts so ham-fisted and distasteful to both parties that they will have an incentive to agree. Democrats will have to stomach even deeper discretionary cuts than in the first round and some Medicare reductions, while Republicans take it on the chin on defense.
The automatic cuts are divided in half between security and non-security. They would amount to a roughly $500 billion cut in defense, on top of whatever is wrung from it in the first part of the deal. In the new politics of austerity, Democrats can’t spend more, but they can target the locus of the only spending to which they are reflexively opposed: the Pentagon. It is a sign of Republicans’ fiscal hawkishness overcoming their national-security hawkishness that the party’s leaders signed onto this deal.
The nation’s debate has fundamentally shifted onto the ground of what kinds of spending to cut, and how fast and far. Keynes would be appalled, but as even Dick Durbin realizes, he’s dead and gone.
The stimulus (Jeynes) is in the baseline. The republicans just passed 10 stimulus'. That is austerity? The debt grows over 10-15 trillion in ten years. You say "...the debate has fundamentally shifted onto the ground of what kinds of spending to cut, and how fast and far." National review has become a joke. How pathetic and sad.
The draconian cuts to defense will prove our undoing. Once again, the nanny state triumps over the most basic Constitutional duty which is to protect this Republic. We learned the hard way what happens when you fail to support the military at Pearl Harbour. The next time we may not be so blessed.
You pointed out the Achilles heel of Keynesian fiscal policy. He or his proponents assumed that gov’t would be able to balance out the budget over the business cycle, payoff the debt accumulated fighting the recession when the economy recovered. But except for a brief episode during the Clinton-Gingrich years, that has not happened for the past 40 years. Once politicians figured out you can keep accumulating debt without what appears to be any harmful effects the idea of any sort of fiscal restraint during good economic times was tossed out the window. The fiscal policies of Bush II by racking up the debt eliminated the room one would need for sustained Keynesian stimulus. This is pretty typical for economists who point out failures in a free market economy. They assume the gov’t can step in and fix it but in reality one is dealing failures in the political process that might make an attempt at a “cure” worse than letting things be.
I hope this is a "good first step" as (I think) McConnell said. Color me worried about the defense of our nation and skeptical of any Democrat giving a rat's patootie about it. Honestly, the delusions that persist in the Beltway are alarming.
Really?
Did I miss where Government spending was decreased and the private sector now provides many of the services Big Brother did?
Anyone else notice how it is only the Tea Partiers who recognize we failed and can admit that?
This debate has shown, however, just how close the GOP is to the Dems.
I don't even know if new leadership would matter. Who would we have as speaker, Ryan? Cantor?
Six of one...eh?
To get your desired results you need appropriate power. You lack that. (And, even then, you'd be dealing with a Democrat President.)
When one lacks the power to force one's will upon a situation, one must negotiate.
Therefore, you obviously think that you know how to negotiate better than the Speaker.
What solution do you have that would get what you want, without exposing us to a total Democrat take-over in 2012, killing all and any chance of reform?
I've decided to use Washington math in my personal finances.
I planned to spend $1 million I don't have next year, but then I changed my mind. So I now have $1 million in pocket, and need to find something on which to spend it ASAP.
"The Budget Control Act of 2011" is a fittingly Orwellian label for this legislative chimera. There is no budget, and there is no more control here than one would expect of an incontinent centenarian.
I guess one can take cold comfort that the political class, save the degreed economists at the Fed and the Administration, has figured out that Keynes is really dead. It is a real pity that fact only penetrated their minds after they arranged to destroy some $14T in wealth.
... a grassroots movement devoted to cutting government has the upper hand in the House of Representatives, ..."
The single most laugh out loud statement I have read in some time.
If, as asserted, fiscal conservatives have the upper hand then why is the debt rising $2.4 Trillion? If, as asserted, fiscal conservatives have the upper hand why did they lose these negotiations on every major point?
Geoph is entirely corrct. We were rumbled, yet again. I do not know which is worse, getting nailed by your opponent or fragged by your own side. There are a lot of faux conservatives who will have to answer for this capitulation in 2012. And when the people see how this insane increase yielded no benefits it will be for the Republicans to explain to their supporters how this could have happened. The Democrats will be sitting pretty because they will have paid their political bills with our children's money just in time for the election.
Mark my words, they will borrow up to the full amount of the limit increase in short order, probably all of it by the next election, there are a lot of votes to buy and constituencies to reward and O has just been given the credit card.
This money will be wasted on useless programs and Democrat vote buying. The economy will not improve. The spending cuts will not materialize.
Economic canibalism of our progeny is the order of the day.
eristic, You miss the context from Mr. Lowry's remarks that you yourself cite, namely, that our grass roots movement has "the upper hand IN THE HOUSE OF REPRESENTATIVES." That is a quite different thing, of course, than having an unqualified "upper hand" as the balance of your post assumes.
Look, I think the debt deal is as pathetic, feeble, and phony as anyone in the Tea Party, but make no mistake, we COULD NOT GET ANYTHING better with Dems controlling two of the three elected players.
Comment after comment derides the House GOP as sellouts and, quite frankly, it suggests a curious misunderstanding of basic civics that I did not expect from a movement so referential to the Consitution. The GOP CANNOT govern from the House alone. They can block, sure, but they cannot unilaterally set policy--this is by constitutional design. This is not a cop out, it's reality.
So, while there was no better deal to be achieved, we could have derailed everything, forced a default or at least an awkward situation that spooked markets, and accept all the blame for the fallout, virtually guaranteeing Obama's reelection and the Dems recapture of the House in 2012. Is that what you wanted?
I, for one, recognize that the very fact that this is even an ISSUE is a huge triumph for conservatives that results directly from the Tea Party's impact on the 2010 elections. Does anyone doubt that a Pelosi-led House would have given The One his clean debt ceiling interest, no questions asked? Now, instead, the debate terms have been set on our terms for 2012.
To use a baseball analogy, it's like we are trailing by three runs in the bottom of the 9th. With two outs and the bases clear, we get a double. Now, with a runner on second, still trailing by three, the Tea Party wants the manager to signal the runner to steal third. Why? There is so little to be gained, but the risk (runner getting thrown out to end the game/Dems sweeping 2012) is so high. We still need many more hits to win the game here, and there is no room for error.
If you're frustrated reading the comments of demoralized Tea Partiers here, go on over to the Nation or the New Republic, and read the comments about how Obama "capitualted" to the "Far Right" and how the "Tea Party" is "running Washington" now. Our movement is not the only one disappointed with this compromise.
The libs cannot fathom how Reid and Obama let this "happen," just as many here apparently think Boehner is a closet Dem. The institutions put constraints on all the players (and thank God--and James Madison--for that) so nobody can get everything they want. This is a reason for the Tea Party to refocus on winning the White House and Senate as necessary preconditions to right our country's finances; it is NOT a reason to give up on our outgunned allies in the House.
Your analysis would be sound, except for the fact that the debt limit was very different from most fights in this crucial regard: Controlling 1/2 of 1/3 of government gave us a veto on increased spending. All we had to do to balance the budget was exercise that veto. But Republicans chose not to.
You and most of the whiners who talk about only controlling "one half of one third of the government" are missing a vital point. We control the purse strings. If the House simply passes a series of bills funding things at the 2008 or even 2006 levels, corrected for a few demographics or good policy reasons, and then goes home on vacation, the Senate and Obama can either ratify them and keep the government running or shut the government down. It's their choice. And the bills can contain safe-guards for the military, etc.
This would immediately improve the rating agencies attitudes toward our AAA, since even a future compromise would be an improvement on the present situation in which, for them, the debt limit bit is only a side-show.
The chances of Boehner actually doing anything other than a smoke-and-mirrors Kabuki dance are minimal. But the present agreement, with a huge automatic tax increase coming with the expiration of the Bush cuts, phony promises by the Democrats merely to cut the rate of increase in spending may be a case of winning a battle while losing the war.
-End baseline budgeting. Budget numbers are based on current year's spending plus an additional amount to cover inflation. No other automatic increases - period.
-Make ALL spending exactly like defense spending. 100% discretionary and all appropriations must be affirmatively renewed every two years. No automatic renewals or "it's renewed unless we vote otherwise" garbage.
-Change CBO scoring to two years maximum. Also require that nothing can be labeled a spending cut unless the appropriation is less than current year spending plus inflation. Everything else is scored as an increase.
-If Congress spends more than it takes in during a given year, the first thing cut are Congressmen's salaries, even to the point where they don't get paid. Same thing happens if they don't pass an actual budget - no more continuing resolutions. If they don't do their job, they don't get paid.
What really needs to change in Washington is the fiscal chicanery practiced by both parties.
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