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The Deal: Where They Won and Where They Lost The Deal: Where They Won and Where They Lost

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DEBT TALKS

The Deal: Where They Won and Where They Lost

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The U.S. Capitol building is illuminated on July 31, 2011 in Washington, DC. U.S. President Barack Obama announced that congressional leaders had reached a tentative agreement to extend the federal debt limit while enacting spending cuts.(Mario Tama/Getty Images)

Correction: An earlier version of this story misstated the mandate of the special committee on deficit reduction. The committee’s mandate is silent on possible cuts to entitlement programs such as Social Security, Medicaid, unemployment insurance, veterans benefits, and others. But these programs are specifically exempted from across-the-board spending cuts if the committee fails to recommend a deficit reduction package to Congress.

It started clean and ended messy.

When the debt-ceiling crisis began to capture the public's and Wall Street's bemused imagination in June, President Obama's Gallup approval rating was 50 percent, the highest of the year.

 

(PDF: GOP House's Summary of Debt Deal)

It's now at 40 percent, the lowest of his presidency, and a disturbing sign that dismay with America's "dysfunctional" government is taking a toll on more than Congress - mired since early spring with approval ratings in the mid-teens. 

Obama won a long-term extension of the nation's $14.3 trillion debt ceiling. The deal extends borrowing authority by at least $2.1 trillion with no threat of congressional obstruction.

From National Journal:
The Lingering Effects of the Debt Impasse


Analysis: Obama Hurt By Debt Debate

The Debt Debate: America's New Civil War?

Insiders Support Keeping U.S. Troops in Iraq Past Deadline

PICTURES: Obama Turns 50 This Week; See Other White House Milestones

But Obama lost on his push for higher revenue. Tax increases - even for favorite targets like corporate jet subsidies and oil companies (heavy on symbolism but relatively light on revenue) - were left to a special committee. That means Obama traded spending cuts upfront without a dime of guaranteed new revenue - already a flashpoint on the left.

 

In the main, Obama did protect Social Security, Medicaid, children’s health insurance, and veterans benefits and other entitlements from across-the-board cuts if the special committee fails to propose specific budget cuts to Congress. The committee’s mandate is silent on the fate of these programs, but since many in Congress see the possibility – if not probability – that the 12-member committee bipartisan committee will deadlock, these programs are shielded from automatic cuts that failure would set in motion.

Also, Obama won a 50-50 split in all domestic cuts between non-defense spending and allocations for defense, homeland security, and the State Department. This amounts to $350 billion over 10 years and gives Obama an opportunity to press for more economical spending in the security sphere. Republicans say they will fight another day to ensure military readiness, training, and availability of necessary weapons systems.

But the president opened the door to Medicare cuts. Even though they are limited to providers, Obama has put Medicare cost savings on the table at just the moment congressional Democrats cherished a clean shot at Republicans for backing a 10-year plan to transform the health care program for the elderly from fee-for-service to a voucher system to finance insurance purchases on the open market.

On the tax side, Republicans are certain the rules will nullify higher taxes. Democrats are equally convinced the magnitude of future spending cuts through caps or across-the-board sequestration will prove so politically unpopular that Republicans will relent and raise taxes. That's what happened in 1990, when sequestration-ordered cuts led President George H.W. Bush to raise taxes in a budget deal reviled to this day by conservatives.

 

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