The culmination of the debt ceiling fight Tuesday is closely analogous to the old French proclamation on the death of king, and the instantaneous ascension of his heir: The debt ceiling is dead. Long live the debt ceiling. Okay, it's not poetic, but it's apt. For better or worse, that's what the divided Congress handed the nation Tuesday in a last-minute wallpaper job to avoid an historic default on federal debt. That evaded a jarring economic train wreck, but it came too late to prevent creation of a cloud over the dollar and a damaging economic retreat.
Under the compromise deal, the battle over the federal budget will stay tied to the debt ceiling, literally and figuratively, until the 2012 elections, and probably thereafter. The agreement, signed by President Obama after Senate approval, is designed to keep the core issue of spending cuts alone, vs. spending cuts mixed with revenue enhancements, pegged to the debt ceiling. The multi-stage votes, mandated spending cuts, the work of the 12-member Special Joint Committee, and the potential vetoes that are tied to bumps in the debt ceiling, all guarantee that.
Both sides, of course, are depicting the outcome in their favor. The Republican leadership, after finally corralling enough of its right-wing tea party faction to make the deal work, claimed that their reckless hostage-taking of the American economy had at least steered Washington to take deficit spending seriously and changed the budget dynamics in the Capitol.
Democrats claimed credit for limiting cuts to safety net programs and keeping Social Security and Medicaid off-limits. They also noted that closing corporate tax loopholes and the high Bush II tax cuts to stanch revenue losses will be on the table in the Special Joint Committee's work on long-term alternatives to reduce the federal debt.
President Obama reasonably went on the offensive, demanding progress on tax issues and loophole reform when the Special Joint Committee begins meeting to formulate an overarching fiscal plan for the next decade.
Yet given the ambiguity of the debt-ceiling compromise, the formula for the continuing work it requires assures ongoing controversy. There will be an immediate increase of $400 billion in the current $14.3 trillion debt ceiling to avoid default. Another $500 billion increase will be allowed to carry the government through February -- under a fig-leaf stipulation that Congress can vote to deny it, and that Obama can veto a negative vote and allow the debt-ceiling to rise.
In the interim, spending cuts of $917 billion over 10 years will be put in motion on Oct. 1, but only $21 billion in projected spending will be cut in 2012.
A Special Joint Committee of six House and Senate members from each party will appointed and begin work Nov. 23 to find an additional $1.2-to-$1.5 trillion in spending cuts or revenue increases. If Congress fails to enact the committee's recommendations in and up-or-down vote on Dec. 23, a negative vote will trigger automatic cuts of the same amount, half in defense and security, and the rest in other areas of the budget except Social Security and Medicaid. Limited cuts would be allowed in Medicare. Under that hammer, additional cuts are certain.
By Dec. 31, Congress must vote on whether to send a balanced budget amendment to the states. If the vote passes, Obama can request a second debt ceiling increase of $1.5 trillion. If the vote fails, he can request an increase of $1.2 trillion. Congress must vote on whether to approve or deny the request. If it denies the request, Obama can again override the veto, and the second debt increase will be final.
This elaborate scenario assures that Congress will be consumed with budget and debt issues throughout next year's elections. But it hardly suggests a winner. The more Americans hear about cuts to valued social programs vs. maintenance of high-end tax cuts and corporate giveaways, the clearer the stakes should become for ordinary families whose job opportunities and economic plight would worsened by tea party ideology.