And the Super Winners Are…

November 22nd, 2011 at 12:00 pm | 42 Comments |

| Print

“Winners and Losers” headlines abounded after the Joint Select Committee on Deficit Reduction (JSC) whimpered to an end.

One of the most interesting analyses was in The Hill, written by Bob Cusak, although we disagree with some of his picks.

Here is our analysis. “and, the winner is…the Democrats!”

Here’s why we pick the Democrats as overwhelming winners in the past 11 month of the Fiscal Follies:

1—Republicans voted to “end Medicare as we know it” when both House and Senate GOP members voted for the Fiscal Year 2012 budget devised by House Budget Committee Chairman Paul Ryan, handing Democrats a message weapon of historically great strength.

2—President Obama absented himself almost entirely from the debate, leaving all the headlines to JSC gridlock festooned with pictures of dejected JSC members, all reinforcing the image of an incompetent Congress. JSC failure helps his re-election.

3—Democrats were able to fashion across-the-board cuts (for the sequester) that exempted almost all of the national safety net programs that Democrats care most about, leaving the defense and annually appropriated domestic accounts vulnerable to cuts of as much as 10% in the future (for a complete list of exempted programs, see here – starting on page 22).

4—Progressive Democrats will see huge defense spending cuts if the sequester in January 2013 occurs, despite pro-defense Senators and House Members who vehemently pledge to overturn the sequester cuts for defense. These defense stalwarts will find the road to repeal filled with parliamentary and political IEDs, leaving progressives in the Democratic caucus pleased.

5—Finally, and much-overlooked, the annual appropriations process is stalled once again in Congress, with the likelihood that 9 of the 12 bills funding the government will be mashed into another Continuing Resolution or, less probably, into an Omnibus bill. Either way, drastic cuts in appropriated programs have been avoided, at least for this year.

It wasn’t a complete sweep for Democrats of course.

Corporate interests won big, also.

1—Above all, the fossil fuel industries (coal, crude oil and natural gas), who anticipated as much as $30 billion in tax increases, but escaped with none.

2—The pharmaceutical industry, who feared all sorts of mayhem in the health entitlement areas.

3—Wall Street, where rumors that the JSC might tackle “carried interest” made many hedge fund managers nervous.

4—Big agriculture, who miraculously escaped any changes in subsidies despite record farm incomes.

5—And above all, all of the millionaire lobbyists in town who will now be kept as busy as possible trying to protect their clients as Congress truly begins to focus on tax reform in 2013.

A couple of other winners were Rep. Jeb Hensarling, the JSC co-chair who transformed his image from hard-rock ideologue to a more pragmatic legislator, and Sen. Rob Portman, who behind the scenes tried to forge a grand bargain of entitlement and taxes.

Losers included Grover Norquist, the anti-tax zealot, who has seen the beginning of the end of his reign of terror against pragmatic Republicans. Defense Secretary Leon Panetta, who has to fight against the odds and his own President to salvage Pentagon programs.

Above all, the biggest loser is the American citizen who saw in full view the weakness and rigidity of Congress.

The common refrain now is “we will settle this in the 2012 elections.” That is, gently, hogwash. Republicans are likely to hold on to the House, but by a slightly smaller margin than now; pick up control of the Senate, but by only 2-3 seats; and have to be considered at this point slight favorites to take the White House.

If those projections prove right, legislative gridlock seems once again assured.

As we wrote late last year, and earlier this year, the person who will break the gridlock and force action is some unknown bond trader in Japan or on Wall Street, who will determine at some point, perhaps in 2013, that United States debt is not the safe haven any more. He will begin selling. Others will follow. It will happen almost overnight.

Congress’ failure throughout this year to begin to resolve the nation’s coming fiscal crisis will be the subject of books in the future. Perhaps in 2025, when the yuan threatens to replace the dollar as the global reserve currency.

For now, the ideologues on both sides can smile, secure in the knowledge that when that bond trader decides to move, they will be safely home in retirement, enjoying their government pensions.

Recent Posts by Steve Bell



42 Comments so far ↓

  • TerryF98

    Once again, doing nothing is by far the best option. The Bush disaster will eventually work it’s way through the system.

  • TerryF98

    Simple.

  • TJ Parker

    Newt/Cain 2012!!!! Everything old is new again!

  • dante

    Do you *honestly* think that the Republicans are going to pick up the Senate, hold the House and capture the Presidency?

    Seriously?

    The Republicans have given the Democrats a MASSIVE stick to beat them with, and Obama can always run against the “do nothing” congress (it’s worked before). Can’t wait to see the advertisements coming out that Republicans are “weak on defense” because they wouldn’t raise taxes on millionaires and billionaires. The Democrats had zero incentive to negotiate away anything, since the automatic cuts come from Medicare *providers* and not Medicare *beneficiaries*. The Republicans have to walk a tightrope between military spending and tax cuts for the rich.

    • Fart Carbuncle

      Just the opposite.

      The Democratswere unwilling to agree to anything less than $1 trillion in tax hikes—and unwilling to offer any structural reforms to put our health-care entitlements on a permanently sustainable basis.

      Bring it.

      • ottovbvs

        Lying again Fart. It’s well known what the shape of the various proffers were and the so called trillion in tax increases was over 10 years. Either way it’s over now and it looks like the Dems have emerged the big winners as this piece points out. Eat your little heart out Fart.

  • jdd_stl1

    It would certainly be nice if Grover Norquist was a big loser in all of this.
    To that end I am still enjoying what David Brooks said,

    “Grover Norquist’s tax pledge isn’t really about public policy; it’s a chastity belt Republican politicians wear to show that they haven’t been defiled by the Washington culture. ”

    http://www.nytimes.com/2011/11/22/opinion/brooks-the-two-moons.html?hp

    • balconesfault

      It would certainly be nice if Grover Norquist was a big loser in all of this.

      Yeah – but I don’t see it happening. The Steve Bells and David Frums might WISH it would happen, but that runs afoul of two realities.

      a) the average GOP voter has been trained in Pavlovian fashion to salivate whenever the tax cut bell is run, and to go into a frenzy whenever a tax increase is discussed. There is no reason to expect this to change in the near term.

      b) the big money that drives the GOP will continue to make each tax cut package benefit the wealthy and corporations far more than it benefits middle class taxpayers (hell – some proposed packages would directly harm middle class taxpayers), and continue to make sure that GOP policy is to unravel the social safety net that protects the working classes.

      Norquist has the backing to make sure that any politician who deviates from his pledge will get hammered in the primaries, and virtually no GOP congressman has the guts to lead the charge over the top it would take to diminish Norquist’s power.

      • sweatyb

        the average GOP voter has been trained in Pavlovian fashion to salivate whenever the tax cut bell is run, and to go into a frenzy whenever a tax increase is discussed. There is no reason to expect this to change in the near term.

        Oh, we’re well past the point where it needs to be about taxes. Whenever Fox pounds its drums and blares its trumpets, they start salivating.

    • sweatyb

      I read that line, but if that’s a criticism, it’s the mildest criticism I have ever seen. If your mindset is that the DC culture is corrupting, then a chastity belt against that taint is exactly what you want.

      Brooks is a smart guy and everything he says is carefully calibrated. If he wanted to criticize Norquist he could have said something unambiguous like: “Mindlessly signing on to Grover Norquist’s pledges has sabotaged the Republican Party’s ability to negotiate in good faith.”

      As it stands, he wrote something that the OWS might read as a criticism and the Tea Party might read as a plaudit.

  • jdd_stl1

    Bruce Bartlett’s take on balancing the budget:

    http://economix.blogs.nytimes.com/2011/11/22/balancing-the-budget-for-real/

    Seems like this is the key to why we are in the state we are in:

    “In 2002, Republicans got rid of paygo so that they could cut taxes and
    increase spending without constraint.”

  • LFC

    And the Super Winners Are… The American People! We’ll get some expense cuts, the never paid for Bush tax cuts will expire, and the federal budget will actually be on a path to sanity again.

    2—The pharmaceutical industry, who feared all sorts of mayhem in the health entitlement areas. Do you mean like being forced to bargain with Medicare for drug prices rather than having the Inverse Priceline Clause (engineered by Republicans, of course) that allow them to name their own price for drugs?

  • Michigan Outsider

    I vote for pundits and commentators as the winners here. The “Super Committee” was not only designed to fail, but it was also designed not to have any consequences because the cuts aren’t really automatic and they won’t happen until 2013 anyway.

    Maybe what we need for this job is a real Super Rabbit?

  • adamcarralejo

    “That is, gently, hogwash. Republicans are likely to hold on to the House, but by a slightly smaller margin than now; pick up control of the Senate, but by only 2-3 seats; and have to be considered at this point slight favorites to take the White House.”

    While I agree that this the ‘midline’ forecast – the confidence interval is larger than you’re giving credit. In other words, it’s the over/under. I think given the uncertainty in the economy (most forecasts give range of 0%-4% GDP growth in 2012), along with the chances of Republican’s nominating an unelectable candidate, their is a realistic, albeit small, chance that Democrats gain control again. Of course, there’s a similar, probably larger chance of Republicans gaining control of both houses and white house.

    But I like this idea – politicians are gridlocked because the voters can’t make up their mind – one year people vote liberal Democrats in a wave election, two years later they vote conservative Republicans in a wave election. It shouldn’t surprise anyone that no middle ground exists for deal-making. Only the voters can resolve this impasse: by voting in enough moderates to re-establish a middle-ground consensus, or to vote enough idealists from one party to form a governing majority.

    • sweatyb

      Where did this “wave” meme come from? Every two years in modern history, we have an election that transforms the government. It’s exceedingly rare that we have an election that doesn’t result in at least some significant change (change of control, change of leadership, etc…)

      The idea that the last two elections were somehow different because they were “wave” elections is something that the cable news and pundits like to say. But it has no bearing on reality.

      I predict that every election from here on out will be a “wave” election. Regular elections are boring and advertisers don’t want to pay to air their ads during plain old elections.

      A couple more “wave” elections though and people will become inured to it. So then they’ll be “tsunami” or “earthquake” elections. And a few years later “comet impact” elections, then “sun exploding” and finally “universe ending” elections. After that maybe they’ll go back to just calling them elections until they can start the “wave” meme again.

  • dugfromthearth

    the election still hinges on the economy. That is why the republicans are doing their best to destroy it once again before the election. Unfortunately it is the Euro mess that will probably determine the fate of the economy.

    • paul_gs

      Destroy the economy? Yeah, like that makes any sense.

      • Graychin

        If you’re a devout, Obama-hating Republican, it makes all the sense in the world. Economic meltdown is a small price to pay to be rid of the Hated Kenyan.

        (I’m simply taking Mitch McConnell at his word.)

      • Traveler

        Have you been under a rock for the last three years?

  • jdd_stl1

    William Cohen (Republican, former Secretary of Defense) says the
    Republicans need to compromise on taxes for the sake of our national security:

    http://www.nytimes.com/2011/11/22/opinion/republicans-are-endangering-national-security.html?hp

    • ottovbvs

      Of course Cohen is an advisor to defense companies but I’m quite happy for him to paint Republicans as playing with national security in the interests of avoiding increasing taxes on the wealthy.

      • jdd_stl1

        I also think Cohen makes an excellent point that the military planners
        will not be able to wait until 2013 to see if this thing is turned around.
        They have to be, you know, planning. They have to start acting in 2012
        in order to be under the limit by 2013.

        • ottovbvs

          See this in perspective. The defense budget including wars etc is around 650 billion. The sequestrations call for $500 billion over 10 years which is on top of the 450 billion of cuts over the same period already instituted. So in round terms annually it’s $100 billion out of $650 billion or 15%. Not chump change although with the war in Iraq over and that in Afghanistan winding down this will help but it’s not going to be achieved without some serious cuts in operations and projects.

    • Graychin

      Security schmurity. We promised Grover.

  • ottovbvs

    I’d broadly agree with the Hill list to which one might add taking the debt ceiling debate off the table until mid 2013; compelling Republicans to claim that defense cuts cost jobs while educational or environmental ones don’t; making Obama look like the adult AGAIN if he has to veto any attempts to overturn the defense cuts; and failing to prevent impending expiry of the Bush tax cuts. I’d disagree the American people were the loosers. The economy has been shielded from major cuts while in it’s current fragile state of health and if you roll these sequestrations in with the expiry of the Bush tax cuts it largely deals with the deficit issue. Whatever will happen to Republicans if this goes away as an issue? Overall it demonstrates yet again just how sharp an operator the president is. Not that it will satisfy his democratic critics because after all he’s failed to deliver paradise.

  • Frumplestiltskin

    oh for heaven’s sake, such rubbish. In the end they will count the hundreds of billions in saving from getting out of Iraq and drawing down in Afghanistan as defense cuts, and why the hell not? If you are not spending money hand over fist there then how can it not count as savings?
    Other elements of increased defense spending (like caring for wounded vets) will be pushed over to entitlements and not be counted.
    As to the rest, Libya proved how to fight and win wars smartly and Iraq how not to. Republicans won’t learn that lesson (they never do, they like to be in charge by occupying other countries and pretending they will turn the people into Texans)

  • think4yourself

    I’ll agree with the basics of the article. Terry says above that what will happen is 7Trillion in reductions and increased revenue. I’m not optimistic that will occur (Washington always manages to snatch defeat from the Jaws of victory).

    I do think gridlock will continue. I don’t think the GOP picks up the Senate, but it will be close and neither side has 60. I don’t think the GOP will lose the House. I also don’t think the GOP will pick up the WH (unless unemployment tanks below what it is now).

    I also don’t think anyone sells the dollar in the next year or two – where do they go, the Euro? Only the Chinese want the Yuan as a global currency.

    All this talk about America in decline is Chicken Little. It’s certainly possible that China will outpace US GDP in the next couple of decades. It’s also possible that they will stumble (see Japan, circa 1985). Even if China does surpass the US GDP, it doesn’t mean the end of America. It simply means that the US is no longer the largest economic power. Instead it’s a close second a great reason to be like Avis (We’re number 2 – we try harder). Even if and when we are number 2, we still won’t have half a billion citizens living in abject poverty. Those GDP numbers are pretty meaningless for the average US citizen.

    • Crime Dog

      China ranks 94th in GDP per capita, and that’s going by their own numbers which are highly suspect. Their “rise to dominance” is mostly due to its population.

  • jamesj

    “For now, the ideologues on both sides can smile, secure in the knowledge that when that bond trader decides to move, they will be safely home in retirement, enjoying their government pensions.”

    A statement like this makes it sound as if both sides of the political aisle are equally ideological and intransigent. But they’re not. That is obvious. So such statements are irresponsible and a very real contributor to our national problems.

  • bdtex

    “Republicans are likely to hold on to the House, but by a slightly smaller margin than now; pick up control of the Senate, but by only 2-3 seats; and have to be considered at this point slight favorites to take the White House.”

    Where did you get that from Mr. Bell? Rose-colored glasses?

    • Graychin

      Republicans are hopelessly attracted to ridiculous fantasies, because reality has a well-known liberal bias.

    • icarusr

      A week before the 2008 elections, Fred Barnes predicted a 289-vote electoral college win to McCain.

      ‘Nuff said.

  • icarusr

    Funny … when the deal came out, everyone – well, practically everyone – said that Obama, the naïf inexperienced boob lost the round to the wily Republicans. Looks as if the poor incomeptent in the White House knew what he was doing … not just in the short-term, but for the long run.

    • balconesfault

      FWIW, I think that Obama would offer that he’s been making the best of multiple bad options, and not getting to find solutions that really will put the country on the best footing.

      Perhaps I’m being naive here, but I really think Obama would rather a solution that works far better for his opposition than for his side, as long as it is the best politically achievable solution for America. Unfortunately, he has been contending with a GOP that is unwilling to move in what he views to be a positive direction, and so Obama is relegated to working out deals that do the least damage.

      That these make the GOP look bad is … well … the fault of the GOP. They could have taken the 10 – 1 deal last summer, but they refused. They deserve to look bad.

  • Fart Carbuncle

    delete

  • SteveT

    Where exactly will this unknown bond trader go when he decides to short the US debt?

    With no safe haven in US T-Bills there is no financial market. Period. At that point all bonds, all equities, all money, all gold is worthless. Get out your guns boys, everyman for himself.

    • balconesfault

      That reminds me of the response I usually have when conservatives claim that bumping the tax rate up a few percentage points on the super-wealthy will force many to flee the country.

      Good luck with that – I hope you enjoy finding some country where you will either:
      (a) need to live in some protected compound where Americans expats can enjoy a cloistered lifestyle protected by the local government;
      (b) need to have a small army of bodyguards to accompany you or your family members anytime you go out into public places; or
      (c) go to some country with a standard of living equivalent to what you enjoy in America, with your income (and particularly capital gains) taxed at a much higher rate than here

  • mlindroo

    Interesting claim also echoed by Ezra Klein: the automatic budget cuts + expiration of the Bush tax breaks in 2013 would mainly hurt Republican priorities. There is JUST NO WAY the Democrats could have forced the GOP to vote for this kind of deficit reduction package — except now it will all become law by default if there is still political gridlock next year!

    http://www.washingtonpost.com/blogs/ezra-klein/post/wonkbook-the-gops-dual-trigger-nightmare/2011/11/23/gIQA1BmxnN_blog.html

    So what am I missing here? Do Republicans believe they will win big by running on a platform of extending the Bush tax cuts for the wealthiest Americans + cutting Medicare/Medicaid instead of military spending? Or do they believe there are enough Joe Liebermans and Joe Manchins in favor of breaking a Democratic filibuster or overriding a presidential veto?

    Looks to me as if the Tea Partiers have shot themselves in the foot twice this year already, ending up with largely illusory spending cuts. Obama’s approval ratings have taken a hit too but it seems House Republicans are doing worse so far. It will be interesting to see what happens next year.

    MARCU$