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Posted by on Aug 1, 2011 in Economy, Politics | 6 comments

Kicking The Can Under The Debt Ceiling

After weeks and weeks of mind-numbing talk from both sides, a compromise solution was finally reached on the debt ceiling crisis yesterday. Pundits are now trying to figure out who won and who lost in the skirmish. From my perspective, the status quo is maintained.

President Obama, while disappointing some of the far left, compromised enough to move towards the political center for his re-election campaign next year. The Tea Party activists won a major victory in their effort to reduce the level of spending of the federal government in the amount and breadth of the deal. The loser in this compromise appears to be Speaker John Boehner. The Tea Party caucus members rejected his plan and their action forced the United States Senate to work out a compromise of their own. It will be interesting to see if the Speaker can retain the loyalty of the rank and file members or if they are emboldened to take more stances against the House leadership.

Both sides will make the case that the compromise was built upon their mission of restoring health to the American economy. Who won? Who lost? Who knows. For now, the political can was kicked in the neutral zone to become a campaign issue in next year’s election. It is the voters of 2012 that are going to have to decide who deserves the credit or the blame for this deal.

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  • DLS

    The debt ceiling “can” was kicked beyond (the elections in) 2012, but entitlement reform, the core of any serious reform, which addresses the problem, spending, and reduces or controls it substantially, is the other and bigger can that still has been kicked again.

    Not reforming entitlements is irritating but only that, nothing like outrage, because politicians do it all the time (so long as they can).

    Notice also the size of the spending reductions. 1.2 to 2.4 trillion dollars is well short of the 4 trillion dollars the ratings agencies are seeking (that’s common news in all media sources), and it was already stated that raising the debt ceiling alone would not keep the credit rating from being lowered, but would depend on serious budget reform.

    Moreover, (emphasis mine about “more” and IMF standard)

    S&P has been notably pointed in its criticisms. John Chambers, its head of sovereign ratings, said on a client conference call late last week that $4 trillion in cuts is just โ€œa good start,โ€ and it wants more to stabilize the U.S.โ€™ annual budget deficit-to-GDP ratio, now at more than 9%. The International Monetary Fund has said that a healthy ratio here is 7.5%.

    (What would Obama’s original January 2010 idea have wrought?)

    Now, the story also says the ratings agencies are becoming more activist, fuel for liberal complaints, and the agencies were, if I recall correctly, chastised for not spotting problems in the financial industry prior to the blowup and bailout in 2008, more fuel for liberal complaints, but they’re correct about seriousness with the budget, as the IMF standard and the US’s plan illustrate.

  • “The International Monetary Fund has said that a healthy ratio here is 7.5%”

    Keep in mind that they make their money off of insolvent countries. I’m sure 7.5% deficits are healthy for their profits.

    Overall growth is still far below other recessions, even with our current massive deficit spending.

  • Allen

    There still is no deal. I don’t see and end to this tea party ignorant madness until the President declares martial law and has the Tea party dragged out of congress and SHOT!

  • JSpencer

    So Allen, hows that crash and burn party working out for you?

  • Allen


    Election will tell
    For you as well
    Your short term win
    Caused a-lot-of pain
    But in the end
    It’s still our game…

    The more poor you create, the more votes you loose. Propaganda can only take you so far.

  • JSpencer

    What “short term win”??? I didn’t win nothin boss. I’m a progressive, just don’t believe in shooting people who disagree with me, even if they are clueless, souless, dangerous idiots. Hmmmm… well now, maybe I was a bit hasty there. ๐Ÿ˜‰

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