The good, the bad and the ugly in the debt limit deal

The Good:

Averts the negative consequences of a failure to raise the debt ceiling, and makes it difficult to blame small government conservatives for any future credit downgrade. (For more on this, read my case for raising the debt ceiling.) 

<p>Though we can debate whether the actual spending cuts reach $2.4 trillion, the bill still does include real cuts. Usually, the debt limit is raised without any spending cuts.

To win over Republican votes, House Speaker John Boehner, R-Ohio, had to bribe members with more spending cuts instead of with earmarks.

The agreement does not include tax increases.

Sets the standard that Congress won’t rubber stamp debt limit increases, creating the precedent that any request to raise the debt limit will have to be accompanied by deficit reduction. (For why this can also be a bad thing, read below).

The Bad

Imagine the next time there’s a Republican president asking a Democratic Congress to increase the debt limit. Given the new precedent, what are the odds Democrats won’t demand that any increase in the debt limit be accompanied by higher taxes?

The bill includes significant cuts to defense spending, and hundreds of billions in additional cuts could be triggered if the newly created joint Congressional committee doesn’t come up with enough deficit reduction.

A lot of the cuts rely on caps, and very few of them occur in the next year, meaning there’s always the risk that future Congresses won’t actually enact them.

The Ugly

The bill doesn’t do anything to address the long-term drivers of our debt problem, and that’s entitlements. The automatic cut triggers exclude Social Security and Medicaid, so we can only assume Democrats on the committee will not agree to touch them. While it does allow for automatic Medicare cuts, they will only be to providers. This does not represent the sort of structural reform that will be needed to bring down the cost curve. Also, these are the same sort of cuts that Democrats relied on to help finance the national health care law, and in the past Congresses have voted to defer avoid such cuts (for instance, the scheduled cuts to physician payments).

Because it fails to address our long-term problems, the deal does not eliminate the risk of a credit downgrade.

The deal includes the awful mechanism first envisioned by Senate Minority Leader Mitch McConnell, R-Ky., in which President Obama can raise the debt limit while Republicans claim to have voted against it through a complicated “resolution of disapproval” process. If Republicans are going to vote to raise the debt limit, they may as well be up front about it instead of trying to have it both ways. This is the same sort of inside Washington legislative maneuver that Americans grew tired of when they decided to put the GOP in power in the first place.

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