Wednesday, August 03, 2011

As the dust settles...  

OK - I've tried to read as much detail as I can about The Deal, and here are some points I found salient:
  • The Template: Republicans, despite TP sentiment they didn't get enough, have seemed to embrace this technique as the new way of handling legislation.
Two nights ago, Senate Minority Leader Mitch McConnell told CNBC’s Larry Kudlow that this debt-ceiling deal was only the beginning. “What we have done, Larry, also is set a new template,” he said. “In the future, any president, this one or another one, when they request us to raise the debt ceiling, it will not be clean anymore.” [More]
What should not be lost here is the language degradation. While I cringed at the "hostage" analogy used by many Dems, McConnell (and hence we can assume, the Republicans) felt perfectly comfortable with this terminology.
From Mitch McConnell, crowing over the debt ceiling fight:
I think some of our members may have thought the default issue was a hostage you might take a chance at shooting. Most of us didn't think that. What we did learn is this — it's a hostage that's worth ransoming. And it focuses the Congress on something that must be done.
Fine. I have no problem with talk like this. And on the bright side, this means that the pearl clutchers at Fox News will stop hyperventilating about Democrats who called Republicans hostage takers. Right? [More]
Advantage: The Right. I am not willing, nor it would appear, is President Obama, to risk default to push forward my political objectives. So this could be only Act I.
  • The Trigger: This could be a big deal or not. I fully expect the Reps to choose members of the Super Committee with pre-sworn positions, which will ensure deadlocked negotiations. For example, you won't see Dick Lugar, Pat Roberts, or Tom Coburn. This mean we need to be very sure we understand what another gridlock will mean. There is some question whether Obama will really, really let the Bush tax cuts expire (assuming he is re-elected). My guess is hell yes. It immediately finds $4T in revenues and he's a lame duck anyway. Furthermore, lacking any negotiating patterns, I can't imagine how the TP will compromise to save them. Therefore, so long accelerated depreciation, and other tax breaks just when our farm income is peaking (yeah - we're all going to shift it ahead)
The key was a decision by the White House to jack up the dollar-value of the trigger mechanism, doubling it from the range of $500 billion to $6 billion to the range of $1.2 trillion to $1.5 trillion. That created a bigger risk for domestic programs that Democrats care about, but it also accomplished the dual purpose of getting to the dollar-for-dollar ratio of cuts to debt-limit increase that Republicans insisted on and made the potential pain to the Pentagon significant enough in Democrats' eyes that Republicans would have incentive to make the super committee work so that massive automatic defense cuts wouldn't be triggered. It was a concession to the GOP demand, but one with a silver lining for Democrats -- who were never going to get a deal with a trigger of half the size.

"For a while, we were focused on trying to get the amount of cuts from the trigger as small as possible," Van Hollen said. "At first, it was kind of counterintuitive ... But the larger cuts requested by the Republicans would come back and bite them, too, if they allowed the trigger to go off.”

Huddle floated the defense-cuts concept by some House Republicans on Saturday night and heard back that it wasn't a popular idea -- as it turned out, an early sign both that House Speaker John Boehner would hear grumbling and that it might be an effective consequence to provide incentive for the super committee to make a deal. On Sunday afternoon, Senate Democratic leaders trekked across the Capitol to meet with Pelosi and her House Democratic leadership team. Van Hollen, according to Democratic sources, was assigned to call Vice President Joe Biden -- Office of Management and Budget Director Jack Lew was also on the call -- to go over last-minute policy details before the Democratic leadership assented.

It wasn't yet over, though. Boehner needed to soften the defense blow. He wanted to include homeland security, the State Department and foreign aid accounts in the "defense" or "security" category of spending for up-front discretionary-spending cuts (the $917 billion that is cut before the super committee recommendations or the trigger go into effect). After a series of phone calls between the White House, Pelosi and Van Hollen, it was decided that the expanded security category wasn't a deal-breaker. In fact, it meant that domestic programs wouldn't have to compete against homeland security and foreign operations accounts for scarce dollars.

Van Hollen said the trigger means Republicans will have to be willing to cede ground on taxes or face massive cuts to defense programs.

"The result is that the Republicans are now faced with a very stark choice,” he said. “This would be their choice. They would be deciding it was more important to protect tax subsidies for oil companies and other special interests than making these investments in the national defense.”  [More]
  • The Defense Cuts: Won't happen, I'm guessing. If they do, they won't be as advertised.
  • The Fallout: Cue one of our best cognitive psychology journalists to show what we have just done, and why it's going to be difficult (but not impossible) to repair.
In other words, we don’t trust people because they seem nice or virtuous or trustworthy, whatever those adjectives mean. We trust them because they get us the good stuff, delivering what Montague refers to as the “social juice” of reciprocity. When we say we trust someone, what we’re really saying is that they’re a reliable source of what we want. I scratch your back, you scratch mine.
And this returns us to the present dysfunction in Washington. If trust is about the distribution of rewards – about learning to expect bonuses from others – then it’s going to be a lot harder to share those rewards in an age of scarcity and deficits. For the first time in decades, congresspeople aren’t trading pork barrel projects and tax breaks – they’re negotiating steep budget cuts. Those cuts might be necessary, but they’re aren’t going to excite the caudate or generate that requisite burst of “social juice.” The traditional means of developing trust among Congresspeople have disappeared.
There are, of course, myriad reasons for the increasing polarization of Congress. But I can’t help but wonder if one of the reasons has to with this newfound lack of favor trading, as it’s increasingly difficult for politicians to barter projects in exchange for votes. It’s easy to hate on Congressional pork and mock all those silly projects that get snuck into bills. But when we do without pork, we also deny our politicians a means of building trusting relationships across the aisle. In this sense, those bridges to nowhere are a sort of benevolent inefficiency, a form of waste that, just maybe, keeps us from becoming a banana republic. Such are the hazards of politics in age of cutting. If trust begins when we share the treasure, what happens when there’s no treasure left to share? [More, please click and read the whole post]
  • The Return to Reality: While many on the right are upset with the outcome, many think they brought the opposition to their knees. But that's so yesterday. Suddenly many deficit fanatics have rediscovered everyday life, and a not-so-good economic picture.
There are really only two options here. (1) The Times is wrong. (2) The Times is right and America has the stupidest goddamn investors on the planet. For months they sat around cheering on the tea partiers and declaring solemnly that the federal budget was just like a household budget and we needed "real action" on the debt in order to build confidence in the economy. Then, suddenly, when they got it, they realized that what they really wanted wasn't dumb slogans but actual policies that would help spur the recovery. And that means looser monetary policy and fiscal stimulus.
So which is it? Has Wall Street really been sitting idly by during the whole debt ceiling debacle and has only now realized what it really means? Can they really be so steeped in the Fox News fantasyland that it never occurred to them until now that cutting federal spending during an economic downturn wasn't really a great idea? Seriously? [More, the reference is here]
And this, I think is why I won't be devoting enormous time watching how The Deal unfolds - we are a struggling economy, and this outcome has not helped us put people to work or bring us any closer together. We have more urgent problems that will soon consume our attention and deplete the Closet of Simplistic Solutions.

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