Not with a bang but a whimper.
Not a surprise, but disheartening on many levels. Let us count the ways:
–Dysfunctionality: The deficit reduction committee grew out of the debt ceiling debacle, and any child of that process was doomed to disappoint. It’s yet another example of legislators turning to a process solution as opposed to doing their jobs. The Congress is largely dysfunctional, unable to craft policy solutions to our biggest challenges.
–A Pox on One of Their Houses: The D’s on the committee went much further onto the R’s side of the field, offering plans that were to the right of Simpson-Bowles or Gang of Six in terms of balancing spending cuts and revenue increases. The R’s came a slight bit out of their comfort zone by offering minor revenues ($300 billion at one point) but offset this by a factor of 10+ by offering it only in tandem with locking in the Bush cuts, costing $3.6 trillion.
–The Wrong Deficit: The deficit we should be fighting now is not the budget deficit: it’s the jobs deficit, but policies to help on that front are nowhere to be seen (D’s tried, I believe, to extend the payroll tax cut and UI extension but never even got close).
–No Deal Better than Bad Deal: The automatic cuts take place in 2013. Though they lack balance (they’re all cuts; no revenues) they’re a better deal than plans that were being kicked around by the committee in its dying days. Some versions of those plans were too harsh to Medicare beneficiaries and, as noted, locked in the Bush tax cuts.
–That is, as Long as the Trigger Holds: R’s are already talking about reconfiguring the trigger to cut defense less and non-defense more, something D’s must stand firmly against. If it is shown—and as of yet, this case has not been made—that cuts of $55 billion per year on the $500+ billion defense budget actually compromise national security, then the only acceptable alternative is to reduce cuts to the non-defense budget or raise the needed revenues to achieve the required deficit reduction.
(By the way, I see here that Gov Romney is complaining about “a $600 billion cut to our military.” That’s a ten-year figure, to be compared to about a defense budget of about $6 trillion.)
–Is There Anything to Feel Good About Here? The only thing I can think of is that the R’s did admit that new revenues need to be part of a deal…like I said, they hardly crossed that Rubicon before running back to the other shore advocating for huge tax cuts. But, sad to say, in this day and age, that was progress.
Also, I should note that the 10-year US T-bill ended the day with a yield below 2%. Markets still view the US as a safe port in a stormy world. Even our Congress has been unable to destroy our standing, though not for lack of trying.