Debt Ceiling ‘Compromise’ Almost Concluded; Only the Middle Class Sacrifices

July 31, 2011
By

The White House and the Tea Party-led House are on the verge of announcing a compromise to raise the debt ceiling, after the monotony of grandstanding by politicians on both sides of the aisle.

 

Later on today an announcement is expected in this last minute 11th hour deal. The deal is close to the same one which was rejected by President Obama previously; the deal was negotiated by House Speaker John Boehner and Senate Majority Leader Harry Reid.

The Atlantic reports:

Among the newest wrinkles, according to informed sources, is an agreement to extend the current $14.3 trillion debt ceiling very briefly to give the legislative process time to work without resorting to emergency, hurry-up measures.

 

Other component parts of the tentative deal include:

  • $2.8 trillion in deficit reduction with $1 trillion locked in through discretionary spending caps over 10 years and the remainder determined by a so-called “Super Committee.”
  • The Super Committee must report precise deficit-reduction proposals by Thanksgiving.
  • The Super Committee would have to propose $1.8 trillion in spending cuts to achieve that amount of deficit reduction over 10 years.
  • If the Super Committee fails, Congress must send a balanced-budget amendment to the states for ratification. If that doesn’t happen, across-the-board spending cuts would go into effect and could touch Medicare and defense spending.
  • No net new tax revenue would be part of the special committee’s deliberations.

The most controversial issue between Tea Partiers/Republicans and Democrats has been raising taxes on the wealthy, which is now called revenue, for political posturing purposes — Tea Partiers claim it’s off the table since they oppose any taxation. Dems have been vocal stating that if there’s an apocalyptic economy and a call for shared sacrifice, then we should all sacrifice.

 

So, it’s almost settled and only the middle class will sacrifice.

 

Many thanks to The Atlantic

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  • chilo

    That is the proper blog for anyone who needs to seek out out about this topic. You realize a lot its almost onerous to argue with you (not that I really would want…HaHa). You undoubtedly put a new spin on a topic thats been written about for years. Great stuff, simply great!

  • http://helpfixamericafirst.blogspot.com Wasp

    There will be no jobful sustainable economic recovery in the U.S. until trade is fixed.

    http://www.helpfixamericafirst.blogspot.com

  • Michael Xavier

    My point is that even if you look to Reagan, there is no evidence that cutting spending leads to substantially growing the economy.

    Because as previously stated, he didn’t cut 15 trillion dollars in spending to generate 15 trillion dollars in economic growth.

    He focused on increasing Federal revenue.

    (cut taxes but increased tax revenue overall)
    generated an entrepreneurial spirit, et cetera,

    If we focus on cutting spending, or any other ideologically inspired or other misdirection, our eye is on the wrong ball, and the entirely wrong court.

    I’m not an expert but, it seems to me that to increase economic growth, what we need to do is:

    Focus on Increasing Economic Growth.

    With that, we will have more money to spend on social programs and everyone might be happy.

    imo.

  • http://helpfixamericafirst.blogspot.com WASP

    The GOP wants to ensure that the wealthiest Americans, who own the multinationals that are hollowing out the U.S. labor market and innovation creating high (and often unreported) long-term unemployment and poverty for average American workers, be given a tax reduction (in an era of historically low tax rates for them) so that they can further invest in the large public multinationals to ACCELERATE this hollowing out of America.

    They have deceived the average Republican into believing Keynesian trickle-down theory will save America. It won’t. Trickle-down increasingly flows from the wealthy into the multinationals, via investment, out to foreign countries and foreign workers to produce foreign made consumer goods (which are increasing in price due to increasing demand for them overseas as a result of transferring American jobs and wealth to foreigners) to be sold in America (in an ever softening American consumer market due to growing joblessness and poverty in America) enriching the wealthy elitists bypassing American workers. Look at our rising Gini Index.

    Exacerbating the situation is that the foreign countries benefiting the most from U.S. unilateral trade dismantlement have kept their trade barriers as strong as ever (e.g. China, India, etc…) and have no forseeable plans to dismantle them. Their markets are primiarily served by their own businesses today and they have no need of U.S. products enmasse. The USA sells more product to the tiny nation of Belgium than ALL of China! Our trade deficit tells the story.

    The GOP completely ignores decertifying public employee unions, decreasing military spending (which is headed to one trillion a year currently), etc… focusing all their attention on denying people medical care and trying to place senior’s medicare and ss funds at the mercy of nefarious financial profiteers who periodically lose all their money in the markets as they did recently with senior investments in the financial meltdown of the unnecessary Great Recession (which they were heavily responsible for creating along with the Democrats) so that we can have tens of millions of future elderly people starving on the pavement with nothing to look forward to one day. That’s not a “solution” that’s insanity.

    This IS THE GOP PLAN FOR THE FUTURE! Don’t let it happen!

    http://helpfixamericafirst.blogspot.com

  • Michael Xavier

    I’m not an expert, but my point is, there is no evidence that you need to cut spending to increase economic growth.

    One has little to do with the other.

    Reagan’s economics actually proves that, because as previously stated, he didn’t cut 15 trillion dollars in social programs to generate 15 trillion dollars in growth, so I don’t know why some in the right wing insist on making that false correlation.

    Again, I’m not an expert, but I think it’s more logical to approach it this way:

    What you need to do to increase economic growth is focus on increasing economic growth.

    When you focus on cutting spending, our eye is off the ball and on the entirely wrong court.

    imo.

  • j gordon

    At this point what i know for sure, is that i will never vote for a democrat again . Obama screwed the middle class back in december and now he is doing it again with the , no revenue issue . He is weak , his party is weak they should be voted out. ASAP.

    • http://FreakOutNation.com Anomaly100

      @j gordon, So, you’ll just allow the country to continue to be ruled by the Tea Party then?

  • logan42

    Prof,

    I was intrigued until you cast the line “If you want the govt. to provide and save you..” which is just a tired right wing line to attack even a moderate point of view these days.
    That immediately moved you from economics professor to right wing troll. Nice touch throwing the “socialism” word around.

  • Michael Xavier

    I’m probably going to manage to piss /everyone/ off with this, but here goes.

    I’m a left wing commie pinko when it comes to being pro helping-people programs, but more right wing when it comes to economics.

    Here’s where the left might scream:

    I have to admit that it’s hard to argue that at the end of the day, all figure compressing and focus and misdirection and manipulation aside /ultimately/ Reagan’s economics program lead to a 15 trillion dollar increase in American wealth.

    and here’s where the right might scream:

    And a 2 trillion increase in American debt.

    The upshot however is that factoring that in, you wind up with a gain of 13 trillion dollars in the American economy under Reagan.

    For that reason, I’m open to the argument that he must have done something right economically.

    That just seems fiscally logical to me.

    And here’s where the left AND right might scream:

    One doesn’t relate to the other.

    The argument that you can inversely relate growing the economy and taxes to say, “see, we don’t need your left wing commie pinko social programs” is an illogical statement.

    Because again, Reagan didn’t cut 15 trillion dollars of “commie pinko left wing socialist pigdog” programs to grow the economy by 15 trillion dollars, he didn’t cut anywhere near 15 trillion dollars to social programs, so I think if you want to learn how to grow the economy, you look to Reagan.

    And if you want to promote social programs, you look for example to Clinton, who also presided over an economic boom AND still managed to spend on social programs.

    The point is they’re /separate/ issues that need to be compartmentalized and tweaked by pros in their respective fields.

    As long as the left and right keep arguing that one MUST come at the expense of the other, we’re fighting a dunderheaded illogical unnecessary apples-and-ibms battle.

    How about instead of this endless political ideological fighting we separate the issues and try to figure out how to improve the economy AND how to improve our commie pigdog social programs?

    Because, history shows that they are not only not inversely related, they’re barely related at all.

  • http://www.thehappyguy.com David Leonhardt

    I am not sure I follow the path from the various points in the agreement through to the conclusion that “only the middle class sacrifices”.

    I understand how the tax on the wealthy – oops, I mean “revenue” would make the rich sacrifice.

    I understand how cuts to be defined later might make the middle class sacrifice and/or the poor sacrifice and even maybe the rich as well.

    I also understand how raising the debt ceiling means everybody will sacrifice (long term it means either higher taxes, lower services or both).

    But I don’t see anything that specifically targets the middle class or leaves them holding the proverbial bag.

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