Debate: US debt ceiling deal

Was it an acceptable deal? What are the pros and cons?

Background and context

Arguments

Pro

• US debt deal reaffirms core social institutions. Daniel Markovitz. "How the GOP lost on the debt deal." Los Angeles Times. August 2nd, 2011: "Progressives have reason to lament the incremental cuts in the deal. But that which does not kill a social contract may make it stronger. And neither progressives nor the country should lose sight of the fact that the core institutions of ours — Social Security, Medicare and Medicaid — have all been reaffirmed."

• Deal needed only avoid default and go little way on deficit. Some seem to have grandiose expectations for the debt deal; that it somehow failed to fully address all US economic, tax, and deficit problems. Yet, all it really needed to do was prevent default and make a solid first step in addressing the deficit problems. It does this. More can be done later, but a commitment to cut $2.4 trillion over the next decade certainly sets the right tone. It is also designed so that the cuts are less significant in the next couple of years when the economic recovery would suffer most from deeper cuts.

Con

• Debt deal doesn't cut spending enough to solve deficit. Jerry Moran, Sen R-KS. "Debt deal not good for America." KSALLink.com. August 2nd, 2011: "This plan may be considered a good deal in Washington, D.C., but it is not a good deal for the future of America. There are virtually no spending cuts in this bill – in fact, it only slows slightly the growth of spending. The amount of spending that is reduced is about $21 billion next year. Given the fact that we borrow $4 billion more each day than what we take in – those savings will disappear in less than a week. It’s unfortunate the country has been through this long drama about raising the debt ceiling and it’s even sadder that the accomplishments are so few.”

• Debt deal cuts spending too early for recovery Paul Krugman. "The President Surrenders." The New York Times. July 31st, 2011: "Start with the economics. We currently have a deeply depressed economy. We will almost certainly continue to have a depressed economy all through next year. And we will probably have a depressed economy through 2013 as well, if not beyond. The worst thing you can do in these circumstances is slash government spending, since that will depress the economy even further. Pay no attention to those who invoke the confidence fairy, claiming that tough action on the budget will reassure businesses and consumers, leading them to spend more. It doesn’t work that way, a fact confirmed by many studies of the historical record."

• Deal is purely spending cuts when public wants mix. Diane Lim Rogers. "Is this really a raw deal for Democrats?" The Christian Science Monitor. August 3rd, 2011: "It’s particularly notable that the deal is all spending cuts when public opinion clearly wanted a mix of tax increases and spending cuts. In just the most recent example of this fact, a July 18-20 CNN/ORC International poll showed that almost two-thirds of respondents preferred a deal with a mix of spending cuts and tax increases. Only 34% preferred a debt reduction plan based solely on spending reductions."

• Sweeping statements against the debt deal. Paul Krugman. "The President Surrenders." The New York Times. July 31st, 2011: "For the deal itself, given the available information, is a disaster, and not just for President Obama and his party. It will damage an already depressed economy; it will probably make America’s long-run deficit problem worse, not better; and most important, by demonstrating that raw extortion works and carries no political cost, it will take America a long way down the road to banana-republic status."

Jobs:

Pro

Con

• The debt deal ignores/distracts-from unemployment Rick Newman. "3 Ways the Debt Deal Fails America." News and World Report. August 2nd, 2011: "It shows total disregard for the jobs problem. Surveys repeatedly show that Americans' No. 1 concern isn't the national debt. It's unemployment. And they're right about that. The lack of hiring is the biggest single problem in the economy right now. There are still 14 million Americans out of work, and perhaps an equal number who have stopped looking for work. The unemployment rate is stuck more than four percentage points higher than it was before the recession. The weak job market is the biggest reason the housing bust persists, spending is weak and the whole economy has been going sideways this year. Washington has now spent the entire summer obsessed with a deal that does absolutely nothing to address the jobs problem. Politicians will return from the traditional August recess with no jobs agenda."

Crisis averted? Did the deal avert a major crisis?

Pro

Con

• Debt deal averts crisis of Congress' own making. Robert de Neufville. "Congress' bad debt ceiling deal." Big Think. August 2nd, 2011: "By passing a deal to raise the debt ceiling, Congress averted a crisis that is entirely of the own making. If Congress had failed to reach an agreement, it would have forced the government to shut down essential services as well as to default on many of its financial obligations. What people usually call “default”—not paying investors who have loaned the government money—could probably have been avoided for a while, but only at the cost of not sending out Medicare reimbursements or giving soldiers their paychecks. Failure to reach an agreement would have done long-term damage to the U.S. position in the world economy, forced the government to pay more interest on its debt, and probably plunged the faltering economy into another real depression. But it’s not as if Congress acted to avert an asteroid. There would have been no crisis at all if Congress simply agreed to spend the money it had already voted to spend. The federal government is not otherwise about to default on its debts."

Pro/con sources

Pro

Click "edit" and write arguments here

Con

• Jerry Moran, Sen R-KS. "Debt deal not good for America." KSALLink.com. August 2nd, 2011
• Robert de Neufville. "Congress' bad debt ceiling deal." Big Think. August 2nd, 2011
• Paul Krugman. "The President Surrenders." The New York Times. July 31st, 2011

External links