The debt ceiling “crisis” has passed, but the critical issues have been barely addressed. The final “deal” had something for everyone, but there was much more, in long-term impact, for the conservatives. Some Tea Partiers and Rush Limbaugh are not very happy, but there was almost no chance their idealized expectations would be attained. Moreover, for them and others who wanted to let the deadline on raising the debt ceiling simply to pass without any action, it was just an opening skirmish in a politico-economic war that can only be decided in the 2012 elections.
Most of the complaining, however, is taking place on the left where it is now fully realized that the conservatives have the upper, if incomplete, hand.
The bottom line, as I see it, is that the consequences of the 2010 national elections have now become the transformative instrument that they were designed to be. The debate of where to increase public spending, and how much to spend, the established tradition for many decades has been replaced by a new culture of reduced public spending and no new taxes. This is what is driving liberals to moan and lament. Their multi-trillion dollar party is over for the foreseeable future. The man they expected to prevent this, President Obama, failed in this basic task, and the left base of the Democratic Party is not happy. To be fair to Mr. Obama, however, a more experienced and clever president might have obtained better terms, but there was no way he or the liberals could have averted the outcome.
On the other hand, although the old trend was halted, the size of the “cuts” is not very large, and as now established through the debt ceiling agreement, not even close to a level that will, for example, avoid eventual downgrading of U.S. debt instruments, something that I have been asserting is much more consequential and dangerous than failing to raise the debt ceiling. The AAA rating by the three major private agencies which set the rating is holding for the short term, but the details of the “deal” fell far short of requirements for averting the downgrade in the intermediate and longer term. The agreement, while historic in that they brought deficit spending in principle to a halt, is essentially now a shell game in the hands of the mandated congressional special committees.
There was no reasonable opportunity to “settle” the issues which separate liberals and conservatives in this “skirmish.” With the White House and the U.S. senate in Democratic hands, and the U.S. house in Republican hands, the debt ceiling crisis could only lead to a much more critical confrontation in the 2012 national elections. As I have pointed out in another commentary, it is almost a certainty that Republicans will gain control of the U.S. senate regardless of the outcome of the presidential election, and (although less of a certainly) it is likely that the conservatives will continue their control of the U.S. house. So next year’s national elections will primarily be about whether President Obama is retained for a second (but probably powerless) term, or he is replaced with someone who will “finish the job” begun in 2010.
The unexpected can always happen in national politics, and often does in one way or another, but it is difficult to see how the economy, with its hands tied by liberal programs and policies, including Obamacare, can recover in less than the a year. On the other hand, the beginning of the introduction of conservative polices now, especially in many individual states, will actually help the economy.
We are in the midst of a transformative period of U.S. economic policy. The liberal assumptions and practices have failed to remedy the current crisis. Liberals will disagree with this, but they cannot avoid the facts of prolonged unemployment, unfunded liabilities, titanic deficits, and the lack of confidence in U.S. current economic policy. it is true that Republicans and Republican presidents have often been complicit in this, and can rightfully be criticized for it, but the simple truth is that it is a very liberal Democratic president now in the White House, and liberal Democratic policies at work in the economy.
Obamacare clearly will make matters worse, possibly much worse, and the liberal preoccupation with raising taxes and increased public spending no longer have their traditional support, especially among independent and centrist voters who will, as always, decide the next election.
It might be comforting to assert that there was an unambiguous winner in the debt ceiling crisis now concluded. As I said, there were details in the final agreement for all sides. But the bottom line is that the direction begun in the 2010 elections is not only intact, it was strengthened. The primary task ahead for Republicans and their presidential nominee is now to articulate how they will repair the economy, reassert U.S. foreign policy, and restore voter confidence in the American future.
A skirmish is past; a long and contentious struggle lies ahead.