US Analysis: The Sham Cuts of the Debt Deal (and One Political Way to Deal with Them)

Now that an immediate agreement on the Federal Government's debt ceiling has been reached, America's deficit problem will end its domination the media headlines for the next 10 days. But that brief honeymoon will end around 16 August, when Congressional leaders announce who they have appointed to the so-called “super-committee" --- the Joint Select Committee on Deficit Reduction --- established in the compromise debt deal. Already, interest groups from both sides are clamouring for appointees who will hold to the respective party line, and lobbyists in Washington are gearing up for a titanic campaign as two of the largest industries in the US --- defense and health care --- face potentially deep cuts come December.

The simple truth is, as the American people have assessed in polls, is that the deal signed Tuesday by the President to avert a debt default has done nothing other than postpone the tough decisions lining up for politicians in Washington. And, while the president announces yet another return to his attention to job creation,  America's economic problems –-- including the anaemic job growth figures --- cannot be solved until the debt dilemma is dealt with. The two are inextricably linked, as Paul Krugman writes at the New York Times illustrates.

And the debt "crisis" and the larger question of stimulating a flat-lining economy already have the company of other issues.  The Federal Aviation Administration has been partly shut down as the Senate cannot agree on funding authorisation --- The Washington Post outlines the issues in an article with the disingenuous title "Debt crisis averted, all eyes now on FAA impasse". That partisan dispute is both the outcome of long-running differences between the parties over unionised labor rights and specific disagreement over wasteful government funding for rural airports that leads to an increase in the Federal debt.

It is a valid point to argue that the debt "crisis" by Republicans looking to create to an atmosphere of fear as they  advance a radical ideological agenda, but the debt as a concept is now the driving force in American politics.

That is why the latest deal was so shambolic. As Senator Tom Coburn (R-Oklahoma) noted in an opinion piece explaining why he voted against it, “In spite of what politicians on both sides are saying, this agreement does not cut any spending over 10 years. In fact, it increases discretionary spending by $830 billion.”

His assessment of the chances of the "super-commitee" delivering on any policy that will help cut the deficit by the target of $1.5 trillion adopts a realistic tone:

The enforcement mechanism designed to force these hard decisions — across-the-board cuts to defense and nondefense programs — will never work. Congress will easily evade these caps. In the Senate, all it will take is 60 votes — the threshold for passing anything. Some have complained about defense cuts, but everyone in Washington knows those cuts can be avoided through supplemental or “emergency” spending bills.

In a particularly galling case of "voodoo" economics, and flat-out misrepresentation of this deal, the supposed $917 billion in "cuts" declared by the Budget Control Act of 2011 --- before any reduction agreed by the "super-committee" --- includes $156 billion in “debt service savings". This "saving" in future spending, projected because the deficit will not rise as much as previously expected, drew the comment from the Congressional Budget Office: “CBO's cost estimates for legislation do not do not ordinarily include effects on debt service costs, but CBO provides such estimates, when requested for broad budget budget plans.”

In other words, CBO does not consider an imaginary cut in interest payments over ten years as a credible means for evaluating the effects of legislation. It only included the figure in this appraisal at the request of politicians keen to sell the deal as somehow cutting government spending in parallel with the raising of the debt ceiling.

Or, as Rep. Ron Paul (R-Texas) explained it in the aptly titled 'When a Cut is not a Cut": 

No plan under serious consideration cuts spending in the way you and I think about it.  Instead, the "cuts" being discussed are illusory, and are not cuts from current amounts being spent, but cuts in projected spending increases.  This is akin to a family "saving" $100,000 in expenses by deciding not to buy a Lamborghini, and instead getting a fully loaded Mercedes, when really their budget dictates that they need to stick with their perfectly serviceable Honda.  But this is the type of math Washington uses to mask the incriminating truth about their unrepentant plundering of the American people.

One way of looking at the math is this. Next year discretionary spending will be cut from $1.05 trillion to $1.043 trillion --- a saving of $7 billion --- but then rises steadily to $1.234 trillion by 2021. Meanwhile, the federal government needs $2.1 trillion to avoid a default before 2013. One can only guess how much the federal government will need then to raise the debt ceiling.

The one bright spot from the debt ceiling debacle is that it has brought both defense spending and Medicare into the spotlight. The threatened trigger if the super-committee cannot agree on cuts of $1.5 trillion are for $1.2 trillion to be automatically cut from defense spending and Medicare, split equally (hence the intense lobbying efforts in the near-future). Proponents and advocates of both these types of spending will need to prepare a strong case for preserving what they consider essential programs . Fareed Zakaria is already presenting the arguments for "Why Defense Spending Should Be Cut", and Rep. Paul Ryan (R-Wisconsin) is renewing his attacks on the present Medicare system.

Once again, politicians have kicked the proverbial can down the road. And, once again, they have dressed up a bad deal as a step in the right direction, while still conducting their mummery as responsible politics. In the spirit of never attack something unless you have a constructive proposal to put in its place, perhaps it is time to consider term limits for politicians: ending the constant spin of who has politically "won" from deals that have only hurt the country in the long term.

Thomas Paine recognised the dangers of politicians becoming entrenched in power in his constitution for Pennsylvania's first state government of Pennsylvania. And while that government was a disaster --- more a consequence of its unicameral structure than term limits on politicians --- it certainly couldn't make things worse in Washington to give it a try. Politics now, with its constant scrutiny and pressure, is not the politics of old where seniority and experience is a major concern.

Imagine if a politician on the forthcoming super-committee, free of the constraint that dissent from his party's line would kill any chances forre-election, who felt free to act on his/her intellect and conscience. Then we might see something get done in the interests of the United States as a whole, where a spending cut really does mean a spending cut.

Surely if the President can be trusted to govern wisely while constrained by term limits, then Senators can.