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NEWS ANALYSIS

Debt ceiling deal accomplishes little

For all the drama, the compromise achieves little in the short term and only delays what most see as the country's key financial decision: whether to raise taxes or reduce Medicare.

August 01, 2011|By David Lauter, Washington Bureau
  • Vice President Joe Biden arrives at the Senate to help finalize the debt deal.
Vice President Joe Biden arrives at the Senate to help finalize the debt… (J. Scott Applewhite, Associated…)

Reporting from Washington — High-stakes negotiations force people to reveal what they really care about, and in the 11th-hour deal to stave off a federal financial default, President Obama and congressional Democrats and Republicans each made clear their top priorities.

For Republicans, it was preventing any tax increase to upper-income families.

For Democrats, it was ensuring no cuts to Social Security, Medicaid and a handful of other programs that aid the elderly and the poor.

And for Obama, it was getting a deal that would end the threat of an economy-shaking default until after the 2012 presidential election.

None of the key players was willing to go all out to actually solve the nation's long-term financial problems. As a result, the deal doesn't.

"In reaching this agreement, each political party yielded to the other party's highest-priority political and ideological interest," and fails to resolve the country's long-term budget problems, Sen. Joe Lieberman (I-Conn.) said Monday.

Indeed, for all the high-stakes political drama and the apparent damage the months-long debate has inflicted on the political standing of both parties and the president, the compromise — what White House officials refer to as a "lowest common denominator" deal — achieves relatively little in the short term.

Over the next two years, the final compromise comes very close to the initial request by Obama — a "clean" debt ceiling increase that allows the government to pay its bills and does nothing else.

In the government's 2012 fiscal year, the cut would be $21 billion, or less than 1% of a nearly $3.7-trillion federal budget, according to the Congressional Budget Office.

The bulk of the projected $2.1 trillion or more of cuts does not start kicking in until after the next election when a future Congress and president could choose to rewrite the plan — a point that many conservatives have worried about.

"Enforcement is the key to whatever we do. It's always in the out years and it never happens," said Sen. Michael D. Crapo (R-Idaho), using the budget lingo for the latter years of a long-term deal.

The bill almost certainly defers until after next year's election the central choice most budget experts say the country eventually must make: higher taxes or deep cuts in Medicare, the nation's huge and fast-growing health program for the elderly.

"We missed a great opportunity," Rep. Steny H. Hoyer, the second-ranking Democrat in the House, said during Monday's debate.

A bipartisan congressional committee set up by the compromise bill is supposed to grapple with the long-term choices over the next four months. White House officials insist they see that panel as a serious opportunity to try again for a major deficit reduction deal. Their hope is that members of both parties will back an agreement rather than accept automatic across-the-board cuts in defense and domestic agency budgets.

But many in Congress, whose leaders will appoint the panel's 12 members, believe the panel more likely will deadlock.

"I think it's very possible, maybe even probable, that with a committee you're going to have a 6-6 vote," said Sen. Saxby Chambliss (R-Ga.).

To protect their top priorities in case those cuts do take effect, all the major players were willing to give up other goals they had sought.

Republicans have long championed spending for the military, but given the choice between protecting the Pentagon budget and avoiding new taxes, they agreed to a potential long-term cut in defense spending that would be significantly deeper than Obama has supported. The cut, about $540 billion over a decade, would require the Pentagon to consider shrinking the active-duty Army, reducing the Navy's 11 aircraft carriers or dropping Air Force plans to buy a new long-range bomber, analysts said.

Democrats, whose hand in the negotiations was strengthened when conservative Republicans refused last week to back a debt ceiling bill in the House, agreed to big cuts in federal agency budgets. But they held fast on Medicaid, the joint federal-state program of medical insurance for the poor. Only a few weeks ago, the program seemed doomed to major cuts that the White House had indicated it could accept as part of a broader deal.

But liberal interest groups rallied to support the program, winning key support from Gene Sperling, the head of Obama's National Economic Council, according to participants in the final negotiations. And House Minority Leader Nancy Pelosi (D-San Francisco) made clear that Democrats would not vote for a compromise plan that included a Medicaid cut, said Rep. Henry A. Waxman (D-Beverly Hills), the party's leading expert on the program.

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