As you of course know, a deal was made at the last minute to raise the debt ceiling in exchange for a complicated scheme intended to reduce spending. CNN has an excellent article explaining some of the details:
The agreement revolves around a two-stage process.
The first stage includes $917 billion in savings, including a roughly $420 billion reduction in the national security budget. The cuts would be accompanied by a $900 billion increase in the debt ceiling.
Because of the pending Tuesday deadline, Obama would have immediate authority to raise the debt ceiling by $400 billion, which will last through September, according to the White House.
The other $500 billion increase in the debt limit would be subject to a congressional vote of disapproval that can be vetoed by Obama.
In the second stage, a special joint committee of Congress would recommend further deficit reduction steps totaling $1.5 trillion or more, with Congress obligated to vote on the panel’s proposals by the end of the year….
If the committee’s recommendations are enacted, Obama would be authorized to increase the debt ceiling by up to $1.5 trillion. If the recommendations are not enacted, Obama can still raise the debt ceiling by $1.2 trillion. At that point, however, a budget “trigger” would kick in, imposing mandatory across-the-board spending cuts matching the size of the debt ceiling increase.
Got that? I’m still not sure I follow it.
Krugman sees dark clouds on the horizon:
For two years, officials at the Federal Reserve, international organizations and, sad to say, within the Obama administration have insisted that the economy was on the mend. Every setback was attributed to temporary factors — It’s the Greeks! It’s the tsunami! — that would soon fade away. And the focus of policy turned from jobs and growth to the supposedly urgent issue of deficit reduction….
Consider one crucial measure, the ratio of employment to population. In June 2007, around 63 percent of adults were employed. In June 2009, the official end of the recession, that number was down to 59.4. As of June 2011, two years into the alleged recovery, the number was: 58.2….
And why should we be surprised at this catastrophe? Where was growth supposed to come from? Consumers, still burdened by the debt that they ran up during the housing bubble, aren’t ready to spend. Businesses see no reason to expand given the lack of consumer demand. And thanks to that deficit obsession, government, which could and should be supporting the economy in its time of need, has been pulling back….
Those plunging interest rates and stock prices say that the markets aren’t worried about either U.S. solvency or inflation. They’re worried about U.S. lack of growth. And they’re right, even if on Wednesday the White House press secretary chose, inexplicably, to declare that there’s no threat of a double-dip recession.
The real danger in this round of negotiations was never that the Republicans would ultimately refuse to raise the debt ceiling. It was always that they would play chicken with President Obama, and he would lose and give away the farm on spending cuts while we’re still fighting our way out of an unemployment hole. He has now done exactly that.
Here’s Mitch McConnell very openly explaining what the Republicans have learned from this:
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.
On the other hand… I don’t really want to live through the consequences, but if you’re a fan of irony, there has been something very dramatically satisfying about watching the deficit hawks seize control of government at the exact moment that their prescription has the potential to drive the country into the ground. It feels like some kind of sober-minded TV show or novel.
Meanwhile, in real life, I am starting law school on Wednesday. That means a lot less time for writing. I’m not sure yet what I’m going to do with this space. I had an idea that I might post case briefs here, which would be dull as dishwater for normal people (“joint and several or several liability for independent tortfeasors,” anyone?) but might be a nice service for future law students looking for resources online. Or I might just ruminate on what I’ve learned about the law once a week or so. Or I might just let this space lie fallow for a while, as I have done before.
We’ll see, but in the meantime I’d like to thank everyone who’s read and commented, both here and on Facebook, even (or especially) people I disagreed with. This has been a good time and a great learning experience, and I’m glad to have had the opportunity to talk to you all.