–Analysts Blame Obama, Hill Leaders For Failing To Seize Opportunity
–Budget Experts Say Final Deal Doesn’t Fix Entitlements or Tax Code
–Analysts Say Both Parties Clung To Time-Tested Talking Points
By John Shaw
WASHINGTON (MNI) – In the final moments of the House debate on the
debt ceiling Monday evening, Minority Leader Nancy Pelosi said it was
important to consider an “existential question.”
“What are we doing here?,” she asked rhetorically, as she began
reviewing the many months of high-stakes battles and brinksmanship
between Congress and the White House on the debt ceiling.
Now that the debt limit legislation has cleared both the House and
Senate and been signed into law by President Obama, it may be a good
occasion to ask a slightly less profound existential question.
What has been accomplished by the protracted debt ceiling debate
and the final package that emerged from it?
Analysts agree that the debate on the debt ceiling was a fierce,
months-long battle in which both parties largely clung to their
traditional fiscal talking points.
Republicans largely blamed the Obama administration for the
nation’s fiscal woes and said the solution rests almost exclusively in
cutting spending and boosting economic growth. Some, such as House
Speaker John Boehner, argued that deep spending cuts would secure
confidence from business leaders and this would stimulate economic
growth.
Democrats have traced the rise of massive budget deficits to the
George W. Bush administration, noting that Bush inherited the largest
budget surpluses in the history of the nation in 2001 and left office
eight years later, handing Obama a projected deficit of $1.3 trillion
and an economy in free fall.
Democrats have said that fixing the nation’s fiscal predicament
will require a “balanced solution” in which both spending restraints and
additional revenues are needed. But key Democratic leaders, such as
Pelosi, have strongly opposed any reduction in benefits for Social
Security and Medicare recipients or any fundamental overhaul of these
programs.
Budget experts say during the long debt hike debate few lawmakers
showed much flexibility in their views or moved off long-held positions.
There were few unscripted exchanges in which lawmakers reassessed their
own positions or conceded arguments that members of the other party
made.
The debt limit debate was essentially eight months of trench
warfare.
As for the final debt ceiling package, there is general relief
among budget experts that a U.S. default was avoided but also broad
agreement that the final package is a disappointment.
Bill Frenzel, a former Republican congressman and now a guest
scholar at the Brookings Institution, says the final package is a
“minimalist” deal.
“The Republic is reeling and there is not a lot in this agreement
that inspires either the public or the markets,” Frenzel says.
“They’ve fought like hell for a lot of months and not accomplished
a great deal. To use the parlance of the day, we’ve basically kicked the
can down the road. We still haven’t tackled entitlements. Democrats
won’t let us do that until Republicans allow revenues to be part of the
mix. But most Republicans are clinging to a rigid no taxes position,”
Frenzel adds.
In a statement, Maya MacGuineas, president of the Committee for a
Responsible Federal Budget, said it’s a “relief that our leaders came to
an agreement to raise the debt ceiling and were able to get some deficit
reduction in the process.”
“But this debate represents a missed opportunity to do something
big, something that would truly put our country on a sustainable path,”
she said.
The debt ceiling debate, she argued, provided Congress and the
White House with the chance to reach an accord on a $4 trillion deficit
reduction plan that would reform Social Security, Medicare, Medicaid and
the tax code.
“This plan comes up short on all fronts,” she said.
Bob Bixby, executive director of the Concord Coalition, said in a
blog post that the “fundamental fiscal crisis is pretty much unchanged”
by the debt hike agreement.
“In the end, what’s remarkable about this debt deal is that it does
so little to address the root cause of our debt problem. Nothing in the
agreement actually forces Congress, the president, or the American
people to confront the growing structural mismatch between entitlement
spending and revenues,” he said.
The underlying bill calls for about $1 trillion in spending cuts
that will be implemented over a decade by adjusting discretionary
spending cuts.
The package also calls for the creation of a special congressional
panel to come up with $1.5 trillion in deficit reduction through
entitlement and tax reforms. This package would be submitted to Congress
by the special panel by Nov. 23, 2011 and voted on by the House and
Senate by Dec. 23, 2011.
If this panel, which will be comprised of six Republicans and six
Democrats, fails to agree on a spending cut package, a budget
enforcement trigger would secure $1.2 trillion in budget savings
through across-the-board cuts.
Under the legislation, the debt ceiling would be increased by
between $2.1 trillion and $2.4 trillion.
The debt increase would occur in two steps: by $900 billion
initially and a second increase of between $1.2 trillion and $1.5
trillion depending on the size of spending cuts approved.
Of the first $900 billion increase in the debt ceiling, $400
billion would occur immediately and the next $500 billion would be
subject to a congressional resolution of disapproval. To block the
increase, the resolution would have to be enacted over the president’s
veto, a step that requires two-thirds majorities in both chambers.
The debt limit package also requires both the House and Senate to
vote on a balanced budget amendment by the end of the year. The
specifics of the amendment have not been agreed to yet.
** Market News International Washington Bureau: (202) 371-2121 **
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