Many are doubtless giving a sigh of relief at the apparent compromise in DC, resulting in the lifting of the deficit ceiling and avoidance of the first-time ever debacle of a U. S. unable to honor its debts. The terms of this deal, however, may turn out worse than insolvency, the cure worse than the disease.
1. Who are the winners?
Clearly this is a victory for the Tea Party wing of the Republican party, with its insistence on a balanced budget, meaning spending cuts, and no increase in taxes. While they had also resisted raising the deficit ceiling, it represents their only instance of compromise.
2. Who are the losers?
President Obama: Americans may not perceive it this way, but it’s the President, who blinked, despite initially insisting on a package that would raise taxes for those earning more than $250,000 a year. We should have gotten wind of this pattern when at the end of 2010 he caved in to Tea Party demands of not raising tax revenue in exchange for extending unemployment compensation.
Democrats: This agreement curtails the New Deal/Great Society mandates foundational to the Party’s outreach to the indigent, working poor, and middle class. Medicaid, Medicare, and Social Security, social mainstays for many, will see cuts, even as inflation increases and medical costs escalate. Cuts will affect our National Parks, environmental safeguards, education, etc. The costs in lost revenue to the States is yet to be reckoned in. As Steven Cohen, Director of Columbia University’s Earth Institute, has it: “All of President Obama’s brainpower, charisma and speaking skills have not translated into clear, crisp, leadership. Instead, I see just another calculating, poll-driven politico. His re-election campaign dominates his Presidency.” Huffington Post Politics, Aug.1, 2011.
Republicans: The GOP will be the primary recipient of public rage in the 2012 elections for their subservience to their Tea Party wing. Ironically, the GOP faces a high probability of the Tea Party running as a third party in 2012, should Republicans nominate a more moderate conservative such as Romney.
The average American: Ironically, our down economy, now into its third year, requires more cash infusion, not less, as a temporary means to stimulating the market place. Had the present legislation been in effect at the outset of the Great Recession in 2008, a hand-cuffed president would not have been able to bail out Chrysler and General Motors, for example. Three years later, these companies have paid back their loans and added 150,000 workers. Making spending cuts are likely to put out whatever blue embers there are, plunging us this time into world depression on a scale paralleling the 1930s.
3. Are there other consequences?
The worst is yet to come. As you’re probably aware, this agreement calls for a Super Committee composed of six Republicans and six Democrats to suggest further budget areas for cutting. If the Committee stalemates or the Congress balks, automatic cuts will ensue. Not only will entitlement programs be targeted as major areas for cutting, but the Defense Department as well, potentially hazarding our national security. What we lose is our flexibility to respond to crisis, whether economic or military.
This imbroglio hasn’t really been about cutting spending. It’s been ideological, a small core of die-hard conservatives operating as an insurgency to overthrow big government. Holding our country hostage, they have been quite willing to shove Americans over the cliff unless their ransom gets paid.