Sen. Harry Reid, Barack Obama, Sen. John BoehnerLast night President Obama and Congressional leaders announced that they had reached a deal on the Federal Government's budget ceiling. The ceiling will be raised by $2.4 trillion --- to $16.7 trillion --- in two stages.
Republican representatives got agreement to sharp cuts in agency budgets over the next decade and the prospect of deeper cuts to come. Democrats also agreed to stage a vote on a balanced-budget amendment.
The deal now goes to both houses of Congress for approval.
Before the agreement was announced, EA's John Matlin offered these thoughts on the political situation:
I am writing this piece early on Sunday morning --- by the time it appears, Congressional leaders may have cobbled together something to deal with the debt ceiling. I have refrained from commenting thus far because I was convinced that cooler heads would prevail and that the resolution, surely a formality, would pass. Why a formality? The US budget was passed by Congress in January this year in the knowledge that the debt ceiling would be exceeded in August. However, this Congress does not feel bound by the economic decisions of those it has replaced.
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I really thought the resolution would pass both Houses until Tuesday last week. Then I looked carefully at the markets. They were selling hard. Commentators interpreted the falls as the market’s decision that there would be no resolution by the deadline. I view things differently. I believe the damage is more long-lasting because markets have decided that American governance has been exposed as a failure.
When governance at News International in Britain failed, thousands of people were adversely affected. When US governance fails, tens of millions are hurt. Investors see their portfolios reduced in value but it does not stop there. Credit agencies will reduce America’s AAA rating, making money more expensive to borrow, slowing down both growth and the economy’s recovery, which translates into loss of job creation and lingering unemployment, not to mention loss of trust, the most important commodity of all.
Who do I blame for this mess? First, those Democrats, like the former Speaker of the House, Nancy Pelosi, who have announced they will treat entitlements as if they were sacrosanct and untouchable. Nobody likes to see the weakest in society hurt by a reduction of government spending, but Medicare, Medicaid, and Social Security are the biggest users of taxpayers’ funds. The proposals do not remove individuals’ rights and everyone needs to contribute to get the economy out of the mire.
Second, I blame the Republicans, especially the Tea Partiers, who need a dose of political philosophy, not to mention reality. “We were sent here to reduce taxes, not raise them,” is the mantra often quoted by the right, but politicians are not delegates. They are representatives who should act in the best interests of all the American voters. On any view, the Republican right is not fulfilling this requirement. These zealots have introduced an element of lunacy into government and are hurting so many, including many of their own supporters. They are not fit for purpose.
Finally, I blame the President. Obama had several options. One was to use the power of Executive Order to raise the debt ceiling. The problem, the White House implied, was is that Congress might overrule him, making him look weak. Mr. Obama, I have to tell you that if you can’t resolve the crisis, you are weak. I am a big fan of yours, but you are fiddling while Washington and the rest of the world burn.
Can you imagine Lyndon Johnson acting like this? Had Mr. Obama asked himself, “What would Lyndon have done?”, he would have found the solution. He could have picked ten Republican Congressmen, seen them individually and explained how, in 2012, their seats would be in play as the Democrats blocked any pork in their constituencies and flooded money and glamourous candidates to get their seats. Had just eight of them changed their votes over the weekend, the problem would have been fixed.
Sadly, it’s too late already. Whilst Congress remains gridlocked, which will be the case until January 2013 at the earliest, the markets will look askance at efforts to control American debt and react accordingly, hurting us all. This is what happens when economic issues are politicised. Maybe, Obama will take a leaf from Bill Clinton’s book, moving to the centre and getting popular support for legislation which Congress hears, but I doubt this will happen.
It is in Shakespeare’s Romeo and Juliet that I find the words to sum up my feelings: “A plague on all your houses.”