The Debt Ceiling Deal One Year Later

Wednesday, July 25th, 2012 by and is filed under Blog, Debt

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As we approach the 1-year anniversary of the disastrous debt ceiling deal hatched late last July, it is worthwhile to reflect on what we have gained from that legislation.  On August 1, 2011, the House passed the Budget Control Act with support of 72% of the Republican conference.  The Senate followed suit on August 2, with support of 60% of the Republican conference.

Buoyed by their opposition to Obamacare and Obama’s profligate expansion of government spending, Republicans had a unique opportunity to exact concession from Democrats by refusing to raise the debt ceiling without a parallel agreement for a balanced budget plan.  Instead of using their leverage to impel transformation change, Republicans grounded into a double play by boxing themselves into a corner – the sequester corner that they are stuck in today.

Obama was granted a full lifeline with a $2.4 trillion increase in the debt limit that would take him beyond the election.  [For some reason, Republicans couldn’t even fight to embarrass Obama before the elections.  Maybe a $1.8 trillion increase?]  There was no realistic roadmap to entitlement reform; not a single agency or program – discretionary or mandatory – was eliminated; Obamacare was deemed off limits; there was no balanced budget amendment.

What was our reward for giving Obama everything he wanted?  What was our part of the deal?  It was actually a liability.  We got a vote on a balanced budget amendment, which was summarily defeated.  We got $917 billion in baseline discretionary cuts that permanently locked in the fundamentals of the Obama era.

In the most insane part of the deal, we agreed to the super duper debt commission 19.0 in an effort to find an additional $1.2 trillion in savings (read tax increases).  The commission was designed to fail because it was evenly split among Democrats and Republicans.  The only way it would have succeeded is if Republicans would have agreed to tax increases.  They actually did, but the concessions were not enough for Democrats.  We put a gun to our head and agreed to a sequestration that, in the 99% likelihood of the debt commission failing to agree on savings, would cut $500 billion from Defense (after Defense already shouldered a disproportionate share of the cuts from spending caps) and $117 billion from Medicare providers.

What are the results of the Budget Control Act?

  • The debt has increased by almost $1.6 trillion.
  • Despite the talk about how the debt ceiling deal would preserve our credit and save us from default, our credit rating was downgraded for the first time in history.
  • Obamacare was totally preserved.
  • Republicans have placed tax increases on the table, further attenuating our leverage for the impending tax fight at the end of the year
  • Most importantly, we are left with the embarrassment of begging Democrats to rescind the only true spending cuts that will actually take effect in 2013.  Between the original $465 billion in cuts to defense from the spending caps and the additional $500 billion from sequestration, there will be real cuts in nominal terms (some of it is baseline, but unlike with other proposed cuts, there will be several hundred billion of nominal cuts).  The debt ceiling deal is now causing a gratuitous schism within the conservative coalition over how to overturn (or accept) the sequester.

It’s not like this was all a secret at the time of its passage.  We warned that we’d be forced to look like fools in 2013, begging to overturn an agreement that “we” had agreed to pass.  It is almost a universal past time among Republicans to mock the debt ceiling deal and decry the sequestration, but most Republicans on and off the Hill wholeheartedly supported the deal.  They even mocked us relentlessly for opposing it.  Red State was one of the view conservative outlets that consistently and articulately forewarned about the pitfalls of the impending deal.  Every one of those concerns has come to fruition.

Most Republicans who voted for the BCA or advocated for it speak of the coming sequestration as if it were some natural disaster to which they are merely an innocent bystander.  When will these people openly apologize for their mistake and admit that it was a fatuous thing to do?

They didn’t listen to use then.  Will they listen now?

Cross-posted from RedState.com

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