I suppose one measure of a compromise is that no one is happy with the final deal. By that measure the proposed bill to raise the deficit ceiling is a good compromise. No one likes it. I don’t either. Here’s why:
From a policy perspective, it is certain to deepen the recession we’re in. Yes, I know technically we’re not in a recession. But no one I know thinks the recession is over. Maybe I don’t know enough bankers or financial wizards, who seem to be doing OK.
It will deepen the recession by pulling money out of federal expenditures, costing as many as 1.8 million* jobs in 2012. Did you notice last month that private sector employment was up by 58,000 jobs, but public sector layoffs cut so much that the net was only 18,000 job growth? That’s what happens when we cut government spending. People lose their jobs, either directly as government employees, or indirectly as suppliers to government. And many more lose out because those people aren’t spending any money.
Job growth was a lot stronger while the stimulus funds were being spent and have dropped as the stimulus dropped. Oh, yes, the stimulus worked, but it doesn’t work after the money runs out.
It harms the least of our brothers and sisters, who will necessarily be damaged by cuts to discretionary spending. They are the least able to cope with cuts because they have nothing to fall back on. Once again, the rich will be OK.
Paul Krugman, Nobel economist: “The deal itself…is a disaster, and not just for President Obama and his party. It will damage an already depressed economy…The worst thing you can do in these circumstances is slash government spending, since that will depress the economy even further.”
Robert Reich, former Labor Secretary: “Anyone who characterizes the deal…as a victory for the American people over partisanship understands neither economics nor politics. The deal…puts the nation’s most important safety nets and public investments on the chopping block…the largest threat to our democracy is the emergence of a radical right capable of getting most of the ransom it demands.”
Another way to look at the deal is politically. Here, it’s a bad deal too. It rewards the Tea Party caucus of the House for holding the government and the economy hostage. Remember Pavlov? And Skinner? The wingnuts will do it again because their irresponsible behavior was reinforced. The Progressives are weakened, because once Social Security and Medicare are put in play by Democrats, it’s hard to maintain the position that we’re the defenders of those programs that the vast majority of the population absolutely love.
Sure, nobody likes it. Maybe it’s because it’s a bad deal.
*Updated to use the numbers from the Economic Policy Institute