Failure could prove costly
Published 12:01 am Sunday, July 24, 2011
After Friday’s collapse of bipartisan negotiations on a “big” deficit reduction deal that was tied to increasing the federal debt limit, we propose a new slogan for our decision makers in the other Washington:
“We never miss an opportunity to miss an opportunity.”
Even presuming that Congress and the White House will forge a minimalist deal to raise the debt ceiling before the Aug. 2 deadline (not doing do so, experts agree, risks throwing the nation back into recession and making today’s unemployment rate look good in comparison), this latest failure could carry a steep price.
Rating agencies have said that an agreement to substantially reduce America’s budget deficit was necessary to avoid having the nation’s credit rating downgraded, a move that would push up interest rates in a fragile economy and cost jobs — perhaps hundreds of thousands of jobs.
In an interview Friday with the Washington Post’s Ezra Klein, Standard & Poor’s David Beers said the performance of the nation’s political system is weighing heavily in his rating agency’s thinking. “What we’re saying now,” he told Klein, “is we question whether despite all the discussions and intense negotiations, if they can’t reach this agreement, will they be able to reach it after the election?”
It’s hard to be optimistic. Before talks broke off Friday between President Obama and House Speaker John Boehner (each side blamed the other), they were reportedly working on a plan that would have taken on both parties’ sacred cows, slashing deficits by about $3.7 trillion over the next 10 years.
Like a similar plan cobbled together by the Senate’s bipartisan “Gang of Six,” it reportedly would have combined spending cuts, entitlement reforms, enforceable spending caps and revenue increases, the latter coming through an overhaul and simplification of our largely incoherent tax system.
It would have marked a serious, comprehensive move toward fiscal sanity, something Congress has long known was necessary but that both parties have avoided in the interest of short-term political gain.
Yet once again, that’s the interest that appears to have won out.
It’s far from clear that an Obama-Boehner deal could have passed Congress, particularly the House. Majority Republicans have dug in ideologically (and, we think, unwisely) against any net increase in tax revenues. Democrats in the House were already balking at any cuts or substantive changes to Medicare (also unwisely). Democrats apparently don’t want to lose what they perceive as an electoral advantage after Republicans approved a plan to transform Medicare into a voucher-like system.
That kind of focus on the election cycle may stand as the biggest barrier to responsible action. A long-term view, one that can save this nation from its own short-sightedness, requires political courage. That’s in short supply these days.
