Monday, August 1, 2011

UPDATE: Reaction to the lousy deal

 Here is some of the reaction to the debt ceiling deal.

LAWRENCE MISHEL, President, Economic Policy Institute reminds us that there was no economic necessity to have the deal spending cuts at this time.

There is no economic necessity to undertake spending cuts or deficit reduction plans at this point in the economic recovery, when high unemployment is expected to persist for several more years. Jobs should be the priority and jobs are the path to get our nation’s fiscal situation to a responsible place. A long-term deficit reduction at this time should only be done if coupled with substantial deficit-related supports to the economy to rapidly lower unemployment this year and next…

Tax cuts enacted last December account for roughly $800 billion (one-third) of the increased borrowing authority needed to maintain obligations to citizens and creditors through 2012; a two-year extension of all the Bush tax cuts is now being fully financed with deep spending cuts…

The spending caps do not allow the budget to meet our nation’s basic needs for public investment, regulation and other domestic needs. The spending caps will reduce non-security domestic spending to just 1.8% of GDP in 2021, the lowest level since the 1950s and the amount we now spend on public investment. Thus, this spending level will not allow us to both maintain current levels of public investment and the normal functions for housing, criminal justice, regulatory enforcement and other needs.

 NATE SILVER at Five Thirty Eight says there is a good chance any deficit reduction plan developed by the bi-partisan committee will be rejected by Democrats AND Republicans and that the triggers would be allowed to go into effect.

If you’re a Democrat and you must accede to $1.5 trillion in cuts — and that’s literally the situation that Democrats will find themselves in if the deal passes through Congress — it’s going to be hard to do better than this $1.5 trillion in cuts. They are very heavily loaded with defense cuts, while containing few changes to entitlement programs or to programs which benefit the poor.

So Democrats will have very little incentive to vote for the panel’s recommendations unless they include tax increases. Does that mean that Republicans will agree to tax increases? Perhaps the Republicans on the committee will consider them — but it is unlikely that rank-and-file in the House will give their sign-off.
In other words, this probably leads us to a stalemate: Democrats cannot do much better unless there are tax increases, and Republicans will not be eager to raise taxes. So the automatic cuts embodied in the trigger are quite likely to go into effect — and those are the sorts of cuts that Democrats, not Republicans, would prefer to make to the budget.

JARED BERNSTEIN says Democrats lost because Americans either no longer believe in or just don’t understand what government does to help them.

If your conclusion is that Democrats got rolled because the President is a lousy negotiator, I disagree.  Not on his negotiating skills…as someone said in comments, I wouldn’t want him in the auto showroom with me when I’m bargaining for a better price.  I disagree that better negotiating skills would have made a big difference.  The problem goes much deeper…

This was an ugly debate where reckless ideologues got the better of the grown-ups in the room who were not willing to risk the economy to protect the government.

But before you go blaming the grown-ups, and I totally agree they’re terrible negotiators, understand that the grown-ups had virtually no-one behind them…

If too many Americans don’t believe in or understand what government does to help them, to offset recessions, to protect their security in retirement and in hard times, to maintain the infrastructure, to provide educational opportunities and health care decent enough to offset the disadvantages so many are born with…if those functions are unknown, underfunded, and/or carried out poorly, why should they care about how much this deal or the next one cuts?

Those of us who do care about the above will not defeat those who strive to get rid of it all by becoming better tacticians.  We will only find success when a majority of Americans agrees with us that government is something worth fighting for.

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