The Debt Deal

HotAir is reporting this is done.

I’ve been following the debt limit debate pretty closely at Megan McArdle’s and Tyler Cowen’s, but haven’t said much here. A couple quick thoughts:

First, the MSM coverage has been atrocious. Straight news pieces have consistently conflated reaching the debt ceiling with default, even after it was explained in various places this was untrue as revenues are several times interest payments — in fact, by most estimates there is enough revenue to cover interest, Social Security, Medicare, and essential military spending with a few tens of billions left over.  This is yet another example of the MSM putting a Dem spin on the news.

Second, it looks like the GOP is getting more or less the deal it wanted, with no new taxes and only the minor concession of probably pushing the debt ceiling past the next election (and even that is diminished by the fact the hike is in two parts). As I’ve been predicting, the Democrats really have little stomach for this fight. Megan has been making the case that the GOP was crazy to not bend more and could end up blamed for any shutdown, but as much as she’s been right about so much else in this case I think she fell victim to D.C.-centric thinking. The Democrats would endure far more pain in a shutdown — they are the party of government spending, government workers, government unions — and all they have to do to avoid that pain is agree to the GOP’s terms. Yes, GOP constituencies would have suffered some the same general pain, and those dependent on discretionary spending government like defense contractors would suffer more, but contractors can endure delayed payments of days, weeks, or months in ways that employees cannot (here in Obama’s home state, contractors are being paid as much a year late by some reports — guess who’s still getting paid on time?). A shutdown would have been painful for the GOP, but they only have to outlast the Dems, for whom it would be excruciating — and politically divisive as Obama was forced to pick and choose between funding the pet agencies of different interest groups.


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3 responses to “The Debt Deal”

  1. Frank Avatar
    Frank

    There are absolutely no meaningful cuts to the bloated U.S. budget. $40 Billion next year, maybe, and the rest somewhere in the indefinite future from ever increasing budgets. What a farce.

    Fred Reed, an expatriate scoundrel, has it about right:

    Congress, a collection of whores, con-men, and penny-ante sharpers from East Jesus, Nebraska, ponders the Great Question: Default now, and admit manfully to being the economic lepers everyone else already knows we are? Or raise the debt ceiling, keep spending like a spoiled Swarthmore sophomore with daddy’s credit card, and collapse a bit later?

    It’s just lovely. The World’s Greatest Economy holding out the begging bowl to China. “Alms? Alms for the poor?” Maybe I don’t have enough Padre Kino after all. Maybe there isn’t enough.

  2. John Henry Avatar
    John Henry

    I used to be a big Megan McCardle fan. I still read her blog daily and still find her interesting.

    In the past year or so she seems to have become just another inside the beltway echo. She seems infatuated with being on the inside.

    She doesn’t realize that she is no longer part of the solution but part of the problem.

    All so she gets invites and gets to hang out with other DC insiders.

    Very sad.

    John Henry

  3. postlibertarian Avatar

    Agree that the reporting has been atrocious. Despite various news reports last week that the government had enough money to last several days past August 2, articles continued to reference a “default” on that date and at least one cable news channel even had a countdown on the screen. News articles also continually pointed to guaranteed increases in debt interest without a deal, despite the lack of movement on long-term Treasury bonds. Finally when Treasury rates plummeted on Friday, some articles said it was because investors were seeking safety due to lack of a debt deal, and other articles said it was because there was speculation that there really would be a debt deal. Atrocious all around.

    Politically this one is mostly on the GOP side, although still balanced enough to anger some on both sides. Of course there is always the small chance that when the giant bill comes to the table today or tomorrow, there will be enough objectors on both sides that it won’t actually pass, but ultimately having a few holdouts on both sides of the aisle looks better than having them all on one side, and it gives room for swing staters in both party to be conscientious objectors.

    But what will be lost in the political scorecard babbling over the next week is the fact that, as Frank said above, there are pretty much no real cuts to the budget, and the little cuts that are there are almost entirely backloaded and unlikely to ever really occur. It will be somewhat interesting to see what comes out of the special committee thing (although isn’t that like the 3rd one of those in the last couple of years?), but I’m not sure how optimistic to be about that. Trillion dollar deficits seem to be the new normal, and for now the world seems content to fund them.