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.