Robert Reich:
Ransom PaidAnyone who characterizes the deal between the President, Democratic, and Republican leaders as a victory for the American people over partisanship understands neither economics nor politics.
The deal does not raise taxes on America’s wealthy and most fortunate — who are now taking home a larger share of total income and wealth, and whose tax rates are already lower than they have been, in eighty years. Yet it puts the nation’s most important safety nets and public investments on the chopping block.
It also hobbles the capacity of the government to respond to the jobs and growth crisis. Added to the cuts already underway by state and local governments, the deal’s spending cuts increase the odds of a double-dip recession. And the deal strengthens the political hand of the radical right.
Yes, the deal is preferable to the unfolding economic catastrophe of a default on the debt of the U.S. government. The outrage and the shame is it has come to this choice.
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Ezra Klein:
A deal that found the lowest-common denominator<...>
In the initial $900 billion in cuts, almost half will come from “security spending” (which includes defense, homeland security, veteran’s benefits, the State Department, etc). Defense is the big money there, and, according to the White House’s fact sheet, it will take a full $350 billion in cuts on its own. But the real hit comes in stage two: if the second round of deficit reduction isn’t signed into law, the “trigger” that will make automatic spending cuts absolutely savages defense spending.
Let’s stop there and talk about the trigger, as it’s arguably the most important part of the deal. In his remarks on Friday, President Obama said he would support a trigger if it was done in “a smart and balanced way.” The implication was that it had to include tax increases as well as spending cuts, as a trigger with just spending cuts wouldn’t force Republicans to negotiate in good faith. The trigger in this deal does not include tax increases.
What it includes instead are massive cuts to the defense budget. If Congress doesn’t pass a second round of deficit reduction, the trigger cuts $1.2 trillion over 10 years. Fully half of that comes from defense spending. And note that I didn’t say “security spending.” The Pentagon takes the full hit if the trigger goes off.
The other half of the trigger comes from domestic spending. But Social Security, Medicaid and a few other programs for the poor are exempted. So the trigger is effectively treating defense spending like it comprises more than half of all federal spending. If it goes off, the cuts to that sector will be tremendous -- particularly given that they will come on top of the initial round of cuts. Whether you think the trigger will work depends on whether you think the GOP would permit that level of cuts to defense.
If the trigger “works,” of course, it’s never used. Instead, the bipartisan committee produces $1.5 trillion (or more) in deficit reduction, Congress passes their plan and the president signs it. But why should we believe that will happen? If Republicans and Democrats couldn’t agree on major deficit reduction this year, why is it going to be any easier in an election year?
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One of the more fascinating aspects of all the commentary, Klein's excluded, is the lack of discussion about the specifics of the deal. Most of the critics are simply yelling "horrible" without actually saying what's that means. The negotiations began with Republicans demanding that Social Security and Medicare be gutted (see Cut, Cap, and Balance or go back to the Ryan plan to destroy Medicare). This was always the Republicans' goal.
A deal emerges with no cuts to Social Security and Medicare, but now it's horrible because it doesn't include immediate revenues. Fine, but it doesn't touch Social Security and Medicare, that would have been horrible.
Then there is the arm-chair quarterbacking: the notion that somehow these critics knew how to better deal with a bunch of economic terrorists. The posturing is that they would have stood firm and not given into the demands of these lunatics. Well, let's imagine the President standing firm not budging as the default date draws nearer, Republicans would have given in right? How does one envisioning that happening: Republicans agreeing to revenue increases? Really?
Any scenario in which the President stands firm as envisioned by the critics means Republicans ride it out (a clean bill was already voted down) to default. Then what: the President uses the 14th Amendment?
In that scenario, does anyone actually see the current critics of the deal, not blaming the President for his failure to reach a deal?
The deal hasn't passed Congress yet. If if fails to do so, then there will likely be a default. What then?
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