Hullabaloo

Thursday, June 23, 2011

 
Sealing the Debt Deal

by digby

January 2011:

At the House GOP retreat in Baltimore, "Majority Leader Eric Cantor (R-Va.) delivered a stern message that the debt ceiling will eventually have to be raised to keep the government from defaulting. But he also promised that Republicans will 'use the leverage' they have to enact at least some of their spending-reduction goals. 'It's a leverage moment for Republicans,' Cantor said in an interview Friday. 'The president needs us. There are things we were elected to do. Let's accomplish those if the president needs us to clean up the old mess.'"

It looks to me as if the debt ceiling talks are pretty much over, what with Cantor removing himself from the talks with a lugubrious lament that Democrats are being intransigent by demanding tax increases at a time of such high unemployment and turning it over to the Big kahunas to tidy up the loose ends.

Both sides have already agreed to substantial spending cuts:

Mr. Cantor said the $2 trillion in spending reductions identified include savings both from the discretionary and the mandatory side of the federal budget. Discretionary spending accounts for roughly a third of the budget and involves spending that is set each year by Congress, while the larger mandatory side of the ledger are programs and spending that is renewed automatically each year without action by lawmakers.

The majority leader wouldn't go into specifics, but said that reductions had been broadly agreed to across the budget including in federal spending on health-care programs. He said that the group had yet to agree on a mechanism to control future spending, such as setting firm spending caps for example. Mr. Cantor said that had been on the agenda for Thursday's session.

Oh gosh darn it to heck, it sure is too bad that the raising taxes to fix the deficit part is the sticking point, huh? But then, it's an article of faith by now that "we don't have a revenue problem, we have a spending problem." (Except, of course, that's just not true.) But I'm sure Obama and Boehner will come up with some kind of band-aid in the form of "closing loopholes" or a "revenue raising" trigger mechanism so that the Democrats can claim they didn't get rolled. (And most of the country, including liberals, will be impressed that Obama was able to achieve any kind of agreement since they've all been led to believe that we are facing a deficit crisis that must be solved before we can raise the debt ceiling.)

But at the end of the day, it's the cuts which both sides have already agreed to that form the basis for this deal. Always was.

If I had to predict I'd say that we'll have a minor revolt by both the progressive and Tea Party wings in the House. But after some drama, the votes will probably be cobbled together with Democrats being forced to form the majority because the GOP has successfully deployed the Madman Strategy. (Isn't that how it usually works?) The Tea Partiers will refuse to vote for it and will shout and scream about the constitution and will run on their "principles" --- and lots of cash provided by Boehner's benefactors on Wall Street.

It's always possible that Obama will be able to extract some serious tax hikes from Boehner. After all, nobody can say with a straight face that they are particularly worried about the anti-stimulative effects of tax hikes when they've already agreed to trillions in spending cuts. But let's not forget that this debt ceiling "negotiation" is and always has been something that both parties knew would end up in a vote to raise it. Tax hikes in exchange for 2 trillion in cuts is not a victory.

That anyone in Washington is even talking about debt reduction at a time of nearly 10% protracted unemployment and a dead housing sector is mind-boggling. But that they are actually doing it means that we are officially in Austerity Land. And that is cracked.

*Oh, and guess what? The debt ceiling vote is only the second act in this Kabuki epic. The big finale is coming up in the budget negotiations. Should be very exciting to see what they slash in the big rave up ending. Gosh, I sure hope the confidence fairy likes it.

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digby 6/23/2011 09:00:00 AM |