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The Debt Ceiling Deal One Year Later

By: Daniel Horowitz (Diary)  |  July 25th, 2012 at 03:44 PM  | 

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As we approach the 1-year anniversary of the disastrous debt ceiling deal hatched late last July, it is worthwhile to reflect on what we have gained from that legislation.  On August 1, 2011, the House passed the Budget Control Act with support of 72% of the Republican conference.  The Senate followed suit on August 2, with support of 60% of the Republican conference.

Buoyed by their opposition to Obamacare and Obama’s profligate expansion of government spending, Republicans had a unique opportunity to exact concession from Democrats by refusing to raise the debt ceiling without a parallel agreement for a balanced budget plan.  Instead of using their leverage to impel transformation change, Republicans grounded into a double play by boxing themselves into a corner – the sequester corner that they are stuck in today.

Obama was granted a full lifeline with a $2.4 trillion increase in the debt limit that would take him beyond the election.  [For some reason, Republicans couldn’t even fight to embarrass Obama before the elections.  Maybe a $1.8 trillion increase?]  There was no realistic roadmap to entitlement reform; not a single agency or program – discretionary or mandatory – was eliminated; Obamacare was deemed off limits; there was no balanced budget amendment.

What was our reward for giving Obama everything he wanted?  What was our part of the deal?  It was actually a liability.  We got a vote on a balanced budget amendment, which was summarily defeated.  We got $917 billion in baseline discretionary cuts that permanently locked in the fundamentals of the Obama era.

In the most insane part of the deal, we agreed to the super duper debt commission 19.0 in an effort to find an additional $1.2 trillion in savings (read tax increases).  The commission was designed to fail because it was evenly split among Democrats and Republicans.  The only way it would have succeeded is if Republicans would have agreed to tax increases.  They actually did, but the concessions were not enough for Democrats.  We put a gun to our head and agreed to a sequestration that, in the 99% likelihood of the debt commission failing to agree on savings, would cut $500 billion from Defense (after Defense already shouldered a disproportionate share of the cuts from spending caps) and $117 billion from Medicare providers.

What are the results of the Budget Control Act?

  • The debt has increased by almost $1.6 trillion.
  • Despite the talk about how the debt ceiling deal would preserve our credit and save us from default, our credit rating was downgraded for the first time in history.
  • Obamacare was totally preserved.
  • Republicans have placed tax increases on the table, further attenuating our leverage for the impending tax fight at the end of the year
  • Most importantly, we are left with the embarrassment of begging Democrats to rescind the only true spending cuts that will actually take effect in 2013.  Between the original $465 billion in cuts to defense from the spending caps and the additional $500 billion from sequestration, there will be real cuts in nominal terms (some of it is baseline, but unlike with other proposed cuts, there will be several hundred billion of nominal cuts).  The debt ceiling deal is now causing a gratuitous schism within the conservative coalition over how to overturn (or accept) the sequester.

It’s not like this was all a secret at the time of its passage.  We warned that we’d be forced to look like fools in 2013, begging to overturn an agreement that “we” had agreed to pass.  It is almost a universal past time among Republicans to mock the debt ceiling deal and decry the sequestration, but most Republicans on and off the Hill wholeheartedly supported the deal.  They even mocked us relentlessly for opposing it.  Red State was one of the view conservative outlets that consistently and articulately forewarned about the pitfalls of the impending deal.  Every one of those concerns has come to fruition.

Most Republicans who voted for the BCA or advocated for it speak of the coming sequestration as if it were some natural disaster to which they are merely an innocent bystander.  When will these people openly apologize for their mistake and admit that it was a fatuous thing to do?

They didn’t listen to use then.  Will they listen now?

Cross-posted from The Madison Project

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COMMENTS

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  • BillM

    …but it’s impossible to have a real (not Washington DC “real”) balanced budget, or reversal (not slowed growth) of the national debt, without real cuts to defense, Social Security & Medicare. Everything else is just a rounding error on the interest on the interest, a few farm & transportation subsidies aside. NPR & birth control pills (or abstinence-only programs) are just internet board fodder.

    And there’s a lot of WWII, Vietnam & hometown make-work in the defense budget. Do I trust Obama, Reid & Pelosi to make those determinations? Of course not.

    Is there a lot for everyone to hate in Simpson-Bowles? Sure. Pass the dang thing anyway.

  • unclefred

    “Buoyed by their opposition to Obamacare and Obama?s profligate expansion of government spending, Republicans had a unique opportunity to exact concession from Democrats by refusing to raise the debt ceiling without a parallel agreement for a balanced budget plan.”

    I lit my congressman up over this, but the simple truth is that with only a house majority, an enormously hostile press, and an electorate who had not yet grasped the seriousness of the situation, there wasn’t much they could do about the debt ceiling.

    We did not take the Senate in 2010. Had we done so we could have put legislation on Obama’s desk. While the house passed things I did not care for, the ultimate goal was and remains, holding the house, winning the Senate and the WH in 2012.

    Seriously about 45% of the electorate think that the Republicans control congress. We lost the narrative. Once that happened that game was over.

    Are we in worse shape? Yes. Looking back does us no good. Look forward to November. If we can primary squishy incumbent with ELECTABLE conservatives do so. It’s time to face the simple fact that to fix this mess we need control of all three branches of the government, and that MUST be our sole focus.

    We have something like 100 days before we either save our nation or lose it. Win the election, then look for scalps. The order is important.

    • RichmondG30

      The Republicans will be given, God-willing, one chance to tackle the spending problem in January 2013. If the Republican Party gains control of House, Senate, and White House and if they fail to heed the warnings from RedState and other conservative sources, they will cease to exist as a counterweight to the Democratic Left. The Tea Party and the Country Club Republicans will fight over half of the country while the Democratic Left drives us completely off the cliff.

      • demsaresatanic

        when we fell short a squish vote or two on the balanced budget amendment. The can will be kicked down the road until it explodes, regardless of the outcome of the election. A political consensus may be reached in the center, but it is too late for centrist solutions to work.

        • hobokenred

          I agree our deficit needs to be eliminated and that our debt level needs to be reduced but I”m not sure a balanced budget amendment is a net positive.

          Can anyone who supports the BBA tell me how we would have financed fighting the Taliban in Afghanistan and Saddam in Iraq if the BBA was in place?

          Looking at the linked chart it looks like Defense spending went from a little under 300 Billion in 2000 to well over 500 Billion in 2006.

          http://en.wikipedia.org/wiki/File:U.S._Defense_Spending_Trends.png

          Under a BBA would the war on terror have required a 200 billion dollar tax hike to get to 2006 spending levels?

          • littlehouse18

            Under a BBA, they might still spend as much or more, but then say they *had* to raise taxes because of the BBA.

          • Dave_A

            If there’s no exception for military operations, then it would run the US right out of sole-superpower status, by preventing us from ever projecting power again (every major war in US history has required an un-balanced budget to finance)….

            If there IS an exception for military operations, then any time there’s a military operation going on overseas (Which will probably be ‘the rest of our lives’ given the global environment) Congress could bust the budget with social programs at home, blame the over-run on military spending, and use the exception to borrow for that purpose…

            There’s really no way to make a BBA work.

          • demsaresatanic

            The national defense argument is groundless, there was a national emergency exception; if you fear higher taxation you will get that anyway, and without a balanced budget. Fortunately for America there were sufficient great economists such as you three to give us trillion dollar deficits, and not to worry, Greece could never happen here.

            And dear DA, thanks for that gem, ?there?s really no way to make a BBA work,? Keynes would have been proud of you.

  • justperhaps45

    Want does not equal need.

    Price does not equal cost.

    Until we recognize that a need has unrecoverable harm attached to failure, and cost includes all consequences of the action, financial balance is unlikely.

    A workable BBA must include reserve, expenditure and income goals and very few hard to activate exceptions. Any person voting for an exception should be required to remit 1/2 of their campaign reserves to the treasury and/or be required to poll a 10% plurality to remain in office. Make it tough and sure that the politicians have some of their own skin in the game.

    The laws of physics are not suggestions. Nor are the principals of responsible behavior.

  • cwfoster

    I worked for Northrop Grumman until January of this year. I’m a US Navy veteran of 15 years, and had only been hired on three years ago after being laid off from a smaller company. Within a week of the announced failure of the “Super Duper Debt Commission” they announced that they were going to have to lay off about 600-900 employees due to anticipated cancellations and rescheduling of various Defense programs the company works on. Many of my co-workers have been there for 20+ years, some have their homes paid for, full 401K accounts are fully vested in the pension plan, and are eligible for Social Security. I had none of those going for me. They started with a Voluntary Reduction in Force, to allow those who wished to retire to reduce the numbers first (that happened in December) then in January, the rest got walked out the door one day. I was in a union, but that did no good for someone who was #7 from the bottom of the seniority list in my shop. I have long been advocating starting a Third Party, because I’m sick to death of so-called Republicans who wont fight. Following the British example, perhaps we should simply call it the Conservative Party. To avoid the same thing happening to the Conservative Party that has happened to the GOP, I would recommend that there be a council elected by rank and file, that would certify each candidate based upon their positions. Further, the bylaws would include a reevaluation each election cycle of each candidate by said counsil, comparing their stated positions to their voting record. ANY deviation from Conservative values would have to be explained. If voting against a Conservative bill because of a liberal amendment, that would be taken into account. Anyone who votes at loggerheads with the stated positions they ran on, would be ejected from the Party, an injuction filed to prevent them from claiming CP affiliation, and no campaign funding would be given. This would eliminate the RINO problem the GOP has found itself with. The damage that has been done to the Republic is too extensive to waste time trying to reform the GOP while Rome burns, it must be fixed NOW, and by now, I mean this needs to start coming together in December 2012!