Wednesday, August 03, 2011

On Not Binding Future Executives and Congresses

Former Treasury Secretary Lawrence Summers on the recently concluded debt deal:

Despite claims of spending reductions in the range of $1 trillion, the agreements reached so far are likely to have little impact on actual spending over the next decade. The deal confirms the very low levels of spending already negotiated for 2011 and 2012 and caps 2013 spending about where most would have expected this Congress to end up. Beyond that, outcomes are anyone’s guess — Congress votes on discretionary spending annually, and the current Congress cannot effectively constrain future actions. True, there are caps and sequester threats in the debt deal, but these are virtually certain to be reformulated in 2013; in other words, the fact remains that discretionary spending going forward will largely reflect the will of future Congresses.

Will Wilkinson (h/t Andrew Sullivan) also writes:

Maybe Washington's game of debt-ceiling chicken went on too long for comfort, but the resolution of the game looks a lot like a pragmatic compromise to me. Unless the bill fails, which it might, it looks like our democracy will have raised the debt ceiling, didn't really cut a thing, passed off responsibility for substantial deficit reduction to a "super committee", which will either come up with a plan that does not bind the future executive and legislature or will trip a "trigger" that won't go into effect until after the next election, and then, again, will go into effect only if the government of the future wants it to go into effect. If this is what "raw extortion" delivers, it's not very much.

I realize most of our Media Villagers apparently don't understand the political process and are busy breathlessly proclaiming the triumph of teabaggerism on the debt, but for all the fire and fury the past few weeks, nothing really much happened here.

The fact that the supposed long term cuts amount to less than that proposed by other policymakers in town has also attracted some attention:

The problem with the plan is that it’s just a step forward; it isn’t a solution. It leaves more than half of its work — finding at least $1.2 trillion in savings to avert an automatic set of cuts — to a new bipartisan Congressional committee. Even if that committee is successful, more tough work will be necessary to avoid, a few years down the road, another crisis over the deficit.

This country needs a plan to reduce our deficits by no less than $4 trillion in the next decade. It needs a plan to cut more wasteful spending in the defense and nondefense budgets than this deal does. In addition, we must address the unsustainable growth of our entitlement programs and reform the tax code to make it more competitive and more efficient.

Even if fully implemented, the debt deal's 10-year budget cuts would amount to only $2.1 trillion, which is far less than the $4 trillion proposed by Obama's own deficit commission, chaired by Bowles and Simpson.

Tuesday, August 02, 2011

No need to panic. Yet.

Reading my Twitter feed this weekend had me thinking the looming debt deal was a blunder and capitulation of historical and tragic proportions.

My reading of the actual deal, however, makes me more optimistic, or at least not nearly so discouraged as many of my Progressive bretheran and sisters.

First, there are no real cuts in the deal. True, about $1 trillion or so is scheduled to be lopped off the budget over the next ten years, but as I understand it, none of that will take effect in this fiscal year (FY 2011) and only $25 bill will take effect in the next FY, starting in October.

Second, the debt limit gets increased into 2013. Republicans wanted a shorter extension. They did apparently enact the McConnell scheme to allow the phony "repudiation" votes to take place in which the teabaggers can vote against a scheduled increase a few months from now, but if the House vote fails to gather a two-thirds vote, the debt limit increase will continue. This is supposed to be a real scary and threatening vote for Democrats who want to support the President. But it seems like BS to me. The debt limit has been increased into 2013. That's the deal. The rest is kabuki.

Third, future cuts, if they take place at all, will either need to survive a separate vote, or will involve significant cuts in the defense budget. Most Progressives don't seem to think much of this "trigger". But to avoid the trigger will require the passing of legislation, agree to by a sizeable number of Democrats to make very painful cuts in social spending. Or the Republicans will need to pass separate legislation somehow sparing the Pentagon from the cuts agreed to in this bill. The default, no pun intended, option is to do nothing. And the do-nothing option of allowing Pentagon cuts to go through, would be better for Progressives. Conservatives can override this, but it won't be nearly as easy as simply holding the debt limit hostage and risking default. Inaction this time won't be on their side.

Finally, to reiterate previous points, there's nothing in this bill that can't be undone by future Congresses. The only sure element in the bill is the debt limit increase.

The real battles lie ahead with the "trigger" and the expiration of the Bush tax cuts. A tax deal as a part of the compromise might have generated far less revenue then the expiration of the Bush tax cuts will. Again, Progressives aren't confident the Bush tax cuts will be allowed to expire. I'm not so sure. The onus will be on Conservatives to pass a bill extending them, while having to explain the tax cuts impact on the debt they've just been complaining about, or they will need to agree to a tax reform bill of some kind to replace them. And if they can't do that, and nothing gets done, the tax cuts expire.

Conservatives have a harder road ahead, as hard as that may be to believe.