The Debt Deal is Done—Assessing Winners and Losers
From Accuracy in Media‘s Roger Aronoff:
The voting is in from the House and Senate, but opinions are sharply divided among both conservatives and liberals as to whether or not the debt ceiling deal was a good one for either party or country. Wall Street’s first response was quite negative, with the Dow down 265 points on the day the Senate sent the bill to the White House.
MSNBC’s Chris Matthews said the Obama administration “gave in to hostage taking.” As ridiculous and offensive as all this left-wing talk of terrorists and hostages is when characterizing people who wanted to see the country moving toward fiscal sanity rather than off the cliff, the Tea Party people don’t feel victorious at all. A front-page Wall Street Journal article says, “Tea Party sees no triumph in compromise,” with plenty of quotes to back it up.
Matthews said the Democrats “gave away the store” and “turned over the wallet to the mugger.” You see, in Matthews’ fevered mind, those who fought to end the reckless financial path we are on are terrorists or muggers or hostage takers. Supposedly this happened in an environment in which popular opinion was on the Democrats’ side, because some polls showed that a majority wanted a “balanced” solution, meaning revenues as well as cuts.
The situation I described in a recent column got even worse in the final days of this battle. Most of the media continued right through the weekend with their countdown to “default,” when that was never an option, and President Obama knew it. He reportedly conveyed that to Wall Street bankers. Talk of reducing the “deficit” by trillions of dollars continued as well. The deficit refers to a single year, beyond that it is called “debt.”
Conservatives are deeply divided over this. Talk show hosts Sean Hannity and Rush Limbaugh are quite unhappy, along with many Tea Party activists, while The Wall Street Journal, Ann Coulter, Charles Krauthammer and others are saying this was a good deal for conservatives and Republicans, at least as good as they could have hoped to get, while only controlling the House, just one chamber of Congress, and certainly not the White House.
No one seems too happy with this deal, other than the fact that a deal was finally reached. The question for all sides is whether this battle was pivotal and will dictate the direction the country is headed, or whether it was just one fairly minor battle in a much larger ideological war that will be decided in the House, the Senate and the White House in 2012.
Clearly, spending was not brought under control. In the language of Washington politicians and pundits, this was all budget cuts. But in reality, Democrats are counting on those tax hikes, at least in the form of the end of the Bush tax cuts, while spending increases every year, adding an estimated $7 trillion to our accumulated national debt over the next decade. And even to arrive at that figure, it will require robust economic growth. If the Democrats get those large tax hikes, it would almost certainly inflict even more damage on an already weak economy.
And then there are these triggers that could be pulled in December. If the House and Senate don’t approve the same legislative agenda by then, it would trigger automatic cuts in Defense, regardless of our threat assessment and military needs. No doubt our military could and should be run more efficiently, but is this any way to run a superpower?
Sen. Tom Coburn, who received some criticism from conservatives for his signing onto the so-called Senate “Gang of Six” plan that included revenue hikes, mainly in the context of tax reform, has been out talking about why this deal doesn’t begin to address the plight we are in. In his speech on the Senate floor over the weekend, he laid it out, item by item. It is not, as he pointed out, the old questions of guns vs. butter. It is a question of massive duplicative and bureaucratic waste, fraud and abuse. You can and should read his full comments here. But here is just a taste:
The average Medicare recipient paid $130,000 into Medicare. The average Medicare recipient takes $350,000 out. How long do we think that can continue?
Medicaid is broke. The reason it is broke is because the States are broke trying to take care of it. We mandate what they must do, and yet the States are choking on Medicaid, and we are choking on matching the amount of dollars. Under the Affordable Care Act, it is now estimated 25 million more people will go into Medicaid. So it is broke.
The Census. It was broke before it started. It cost twice what it did 10 years ago, $8 billion more than what was estimated.
Fannie and Freddie. We know they are broke. They are $190 billion–that you have now committed for, to pay to get them out of hock…It is going to be $300 or $400 billion that …we will be required to pay.
Social Security. People say it is not broke. We have $2.5 trillion worth of IOUs. Well, the fact is, that money is gone. Congress stole it, spent it on other things. Now we lack the ability to go into international financial markets to borrow that money to put that trust fund whole.
What are the problems? We have 100 different programs with 100 sets of bureaucracies for surface transportation alone. Why do we do that? Why have we not fixed it? That is a question the American people ought to be asking.
We have 82 programs to improve the quality of our teachers, run by the Federal Government across 7 different agencies. Only one of them is at the Department of Education. Why are we doing that?
We have 88 economic development programs in 4 agencies, for which we spend $6.8 billion, and we have another 100 economic development programs in 6 other agencies, for which we spend another $4 billion, and not one of them has ever been measured to see if it improves economic activity.
We have 56 programs to teach financial literacy to the American people. First of all, I question whether we ought to be teaching anybody financial literacy as a government when we run it so poorly. But if, in fact, we do, why do we have 56? And, oh, by the way, not one of them has ever been measured to see if it effectively teaches somebody financial literacy.
We have 47 job training programs which cost $18 billion a year, 9 different agencies, 9 different sets of bureaucracies, and all of them but three overlap with the other. That is according to the Government Accountability Office. Why? Why would we do that?
We have 18 programs for food for the hungry. That is something we all want to be involved in. Eighteen? Why 18 sets of bureaucracies? How well are they working? Are they effective? Could we do them better? The question has not even been asked by Congress.