After a month of high drama the Senate at high noon today voted to pass a bill to raise the debt ceiling. How to evaluate this outcome? If I must give a one-word verdict, it would be “good.” If I can expand to two words, it would be “not good.” If I can elaborate to 20 words: “The legislation confirms the sorry state of our public deliberations, but it is probably the best that could be hoped for,” given where the negotiations were as the big hand on the clock approached twelve.
In what sense was the outcome to the debt ceiling standoff good? It was much better than a number of alternatives that could have easily happened. After the pin had been pulled out of the hand grenade, Washington managed to put it back in. Specifically, it is good that:
- Those who favored a US default — in some cases deliberately, not just as a bargaining tactic — did not prevail.
- Those who sought to force the Congress and White House to go through the madness of voting on the debt ceiling every few months between now and the next presidential election did not prevail.
- The bill’s 10 years of spending cuts are not front-loaded. Frontloading would have substantially raised the chances of going back into a new recession. (So would have default or an uncertainty-maximizing short-term fix.)
- The bill has a mechanism that just might in November demonstrate to the arithmetically innumerate that it is literally impossible to eliminate the budget deficit if the cuts are to come primarily in discretionary non-security spending. Instead, military spending, entitlements, and tax revenues will have to be part of the eventual solution — as also favored by the American people in polls, even a majority of Republicans. This epiphany on the part of the people who are described as die-hard fiscal conservatives is needed before we can break the political log-jam. A solution is not possible so long as the extremists are under the mistaken belief that the deficit can be eliminated with cuts concentrated in domestic discretionary spending and so long as they have veto power in the eyes of the Republican leaders.
The mechanism is to force Congress to confront an unpleasant but clear choice between (i) on the one hand, deep automatic cuts that hit defense, which are anathema to most Republicans, and Medicare, which are anathema to Democrats, and (ii) on the other hand, the more thoughtful recommendations of a bi-partisan Joint Select Committee on Deficit Reduction, which would certainly spread out the pain more to include increased tax revenues, anathema to Republicans, and other entitlement cuts, anathema to Democrats. The 12-member panel is to report its recommendations in late November, and the Congress is to vote on them in December. This mechanism is of course crude, but may be just the sort of thing we need to force individual congressmen to confront arithmetic.
Some have asked how this panel will differ from the ill-fated Simpson-Bowles commission. A critical difference is the requirement that the Congress must vote up-or-down on the recommendations. (This was also a feature of the original version of what became the National Commission on Fiscal Responsibility and Reform; but the provision was voted down by Senate Republicans, including some who had sponsored the proposal until President Obama came out in favor of it in January 2010.)
In what sense was today’s outcome to the debt ceiling stand-off “not good?” It would have been better if:
- The Republicans had agreed to some of President Obama’s various compromise proposals over the last year and a half; or
- The showdown had at the last minute forced a “$4 trillion” Grand Bargain in which all sides had ceded ground in order to adopt a workable and credible plan to get back to fiscal responsibility gradually over the coming decade, rather than subsisting on political rhetoric.
- The outcome had included something to help the current faltering recovery.
- President Obama had come off looking like Gary Cooper.