BREAKING: Divided Government solves the debt ceiling “crisis”.

BREAKING: Divided Government solves the debt ceiling “crisis”.


Divided Government fights for truth, justice, the American Way, and a new deficit ceiling.
Divided Government to the rescue.

ABC’s John Karl reports that a deal in principle has been struck between our Democratic President and Republican leadership in Congress:

“Here, according to Democratic and Republican sources, are the key elements:

  • A debt ceiling increase of up to $2.1 to $2.4 trillion (depending on the size of the spending cuts agreed to in the final deal).
  • They have now agreed to spending cuts of roughly $1.2 trillion over 10 years.
  • The formation of a special Congressional committee to recommend further deficit reduction of up to $1.6 trillion (whatever it takes to add up to the total of the debt ceiling increase). This deficit reduction could take the form of spending cuts, tax increases or both.
  • The special committee must make recommendations by late November (before Congress’ Thanksgiving recess).
  • If Congress does not approve those cuts by December 23, automatic across-the-board cuts go into effect, including cuts to Defense and Medicare. This “trigger” is designed to force action on the deficit reduction committee’s recommendations by making the alternative painful to both Democrats and Republicans.
  • A vote, in both the House and Senate, on a balanced budget amendment.”

Hmmm. Let’s see – significant cuts across the board, cuts to the military, cuts in entitlements, a vehicle for revenue enhancement and even more cuts later, and all on the brink of default to the dissatisfaction of both the right and left.

I expect this will pass with narrow bipartisan support over narrower bipartisan opposition from the extremes of both parties. Just the way it is supposed to work.

I am not one to say “I told you so”. But – just this once – I would like to take this opportunity to mention that – um – I told you so.

X-posted from “Divided We Stand United We Fall”

  • Maria

    LOL $1.2 trillion over 10 years! How is that ever going to help? The problem is now. Not in 10 years….

  • Al

    But will we lose are AAA? Will big business start hiring people once this bill is sign and will they’re be something that stimulated like a payroll tax holiday? While it’s good that the two side have come to an agreement most Americans care about one thing, JOBS, JOBS, JOBS.

  • mw

    By itself nothing. But this is a two-step (or three step) with a trigger. Deeper cuts happen automatically if not agreed by a commission and Congress.

    Of course, they’ve got to pass it first.

  • mdgeorge

    Notice that both the trigger and the initial reduction include things that the republicans want but the left (and the electorate, and economists) don’t – spending reduction (including Medicare), but no revenue increases. This once again puts the tea party caucus in the position where sticking they’re thumbs in their ears and saying “NO!” will get them everything they want.

    Moreover, this is not in any way a solution to our real problem. which is an extremely weak economy with low GDP growth and high unemployment. Yes, deficits matter. No, they should not be top priority right now. This is solution to a completely manufactured non-crisis, that exacerbates the real crisis. Yay divided government!

    Look MW, I understand your divided government fetish. It’s a very appealing position in the abstract…no one has too much power, it must be perfectly fair! But when one of the parties’ goal is to drown the government in the bathtub and make it completely dysfunctional while the other party wants to actually use the government to solve problems, gridlock is not centrist, independent, or bipartisan. It is right-leaning.

  • mdgeorge

    The house is on fire. I’m glad we’ve passed a bill to change the batteries in all of our fire alarms, replace our aging fire extinguishers, and reduce the size of the fire department. That will really help us avoid fires.

  • kranky kritter

    It’s only fair that divided government “solved” the debt ceiling crisis, since they were the ones that created it. Without divided government, this would have been done weeks or months ago with no fanfare.

  • Desi

    It appears that the Republican Speaker of the House does not hold the leadership position of his party. This nation seems to be heading for bankruptcy. In coming years how will historians tell this story?

    “In the year 2011 the United States collapsed from the inside. The forces of Nazism, Communism, and Islamic terrorists were unable to destroy the world’s most power country. Instead it was the infighting that toppled that nation. Today that country has split into many nations.”

  • kranky kritter

    Oh and I agree with anyone else who declines to celebrate reducing the deficit by 120 billion annually on average. That’s not even close to what needs to happen to reach sustainability.

    The “trigger” gets us up to 2.8 trillion over a decade, which amounts to 280 billion annually. Which is still not close. Period. If we’re spending more than about $1.05 for every dollar we collect, our debt hole is still getting much bigger way too quickly.

    It’s an input-output problem. Anyone who fails to investigate the issue that way while sticking to their preferred ideology is just jerking himself off and pretending he’s having sex.

  • mdgeorge

    kk…is it jerking off to consider the denominator of that equation? After all, that’s where all the idiology (that was a typo, but I like it :)) comes from. Tax cuts pay for themselves / stimulus primes the pump, right?

  • kranky kritter

    Well first, I deny that I’m any sort of go-to expert on jerking off. :-)

    But I don’t know what you’re referring to as either the equation or the denominator. Please explain.

    FWIW though, anyone who understands the laffer curve a little bit knows that there’s no guarantee that tax cuts will pay for themselves. They know that there’s a constantly moving optimal spot that maximizes revenue. [Of course, it’s only optimal from the PoV of maximizing revenue. There’s no intrinsic reason why the government ought to seek to maximize revenue.]

    Tax cuts might actually increase revenue if they were previously so high that they were disincentivizing. There’s plenty of data showing that can happen. Or cuts might decrease revenue. In the case of the Bush cuts Obama renewed at gunpoint, I haven’t heard anyone cite evidence that those cuts increased revenue.

    There are always going to be claims that tax cuts “spurred” the economy. Nothing anyone can do about that. The economy is SO multivariate a model that well-educated and motivated spinners can make plausible cases for either side of that argument and very, very, very few folks know enough to judge how solid a case has been made. And I don’t count myself among the folks qualified to undertake such critiques.

  • gerryf

    Extortion over the debt ceiling wins, and the country loses and somehow MW thinks divided government is a good thing….sigh

  • Loviatar

    @ mw


    Thanks for the post it gave me a much needed belly laugh.

    I Told You So (shakes head and chuckles)

  • mdgeorge

    @kk: problem = debt/gdp. gdp is the denominator.

    I think we’re more or less in agreement, I think arguments about policies that propose to reduce the deficit by increasing the gdp are extremely questionable, and tax cuts especially.

  • cranky critter

    One problem is that reducing debt and propping up the economy are very arguably part zero-sum. I’m not especially convinced that reducing debt will have a salutary effect on the economy over the near term, even though we are quite likely to see a post-debt-crisis bump. But I do support debt reduction anyway as a matter of sustainability.

    Increasing GDP, if that happens, IS somewhat likely to result in increased fed revenues.

    I think almost everyone lost here, except for debt, and top bracket earners. Debt was the big winner, because we got less substantially debt reduction than we might have if we brokered a compromise that included SS/medicare reform and top bracket tax increases.

    Not that I am wedded to a raise in the top bracket. I would settle for a broadening of the tax base that closed loopholes, as long as it led to increased revenue collection. Even with entitlement reform, the cost growth in SS and medicare is far too vast to be financeable over the intermediate term with static fed’l revenue.

  • cranky critter

    Well increasing gdp almost certainly leads to increased tax revenue, when the economy gets bigger, uncle sam tends to collect more dough. it’s connecting the other dots that are iffy. Laffer says so.

    I am not sure who lost, but the big winners were debt, and top income bracket folks. Debt ended up being reduced by FAR less than it would have if the Bush top bracket break was eliminated and ss and medicare were reformed.

    Most non-ideologues acknowledge that encouraging economic growth and reducing debt are not necessarily consonant goals over the short term. But I still support deficit reduction as a matter of the sustainability of gov’t spending. I am not wedded to top bracket increases. I’d settle for broadening the tax base by closing loopholes as long as it led to increased fed’l revenue.

    The rate of growth in the costs for SS and medicare are such that there is no way they can realistically be financed over the intermediate term if gov’t revenues remain static. So as the gapo widens, it gets bridged only by higher revenue or very drastic entitlement reform.

    I’d call that latter bit a conservative fantasy. We’ll surely see dial tweaking in a number of areas. But what fraction of Americans are relying on SS as their only or main source of retirement income? What fraction is relying on medicare as their retirement health insurance? In each case, far too big a fraction for drastic reform.

  • mdgeorge

    cc…I’d agree with your last point, if we didn’t have such a disconnect between voters and congress. The republican house got voted in to end death panels. It seems to me like a _lot_ of people have buyers remorse, since they think they were voted in to strangle the government.

    In the current environment of kick-the-bums-out wave after kick-the-bums-out wave, it seems to me like a perfectly reasonable strategy to get your two years in congress on a wave of kicking out the other guys, and then throw caution to the wind and enact your wet dream policy. It seems to working out pretty well for the house repubs.

  • bekka king


    “The house is on fire. I’m glad we’ve passed a bill to change the batteries in all of our fire alarms, replace our aging fire extinguishers, and reduce the size of the fire department. That will really help us avoid fires.”

    -Exactly. After all that, the best they came up with is a glorified kicking of the can down the road? Scary isn’t it?

    As usual, one party has no brains, and the other party has no balls.

  • cranky critter

    Disagree. My sense is that, if there’s any one thing that the freshman GOP house class got voted in on, it was tea party sentiment. And IMO the primary tea-party sentiment (granted among several) is anti-debt/anti-big government.

    I am sure mileage varies on that. But my take is that we’ve gotten some of what we needed regarding deficit reduction, but not nearly enough. Not too many folks seem to be noticing how anemic this deal is on reduction.

    Don’t overreact to this win by an inflexible core. They’d have won more reduction by being flexible, for example. Also, don’t overreact to the possibility of big changes in the house every two years. After all, it’s not a bug. It was designed as a feature that one chamber of congress would work on a rapid feedback loop. Noit only does this man that reps perceived as bad actors get kicked out, it means that ther bad actions will be subject to fairly prompt revision is the people really support that.

    I am highly skeptical of the possibility that some transient house contingent could drastically alter SS or medicare in ways that would not be undone by the next house. Big changes require consensus among the President and both chambers . . . and us. Another feature, BTW.

  • cranky critter

    moderated y[6oihs’hsn

  • WHQ

    Is anyone else getting a really small font when on this post or the main page, which includes this post, on all the text other than the text of the post, itself (comments, sidebar, etc.)? If so, there’s something wrong with the coding (if that’s the right word) on this post. If I go to any other post, the text is normal. Only the main page and this post exhibit this problem. The post looks normal, but everything else is too small to read.

  • WHQ

    Laffer says so.

    Seriously? You read the post on the editorial from the H&R Block founder, right? The peak on the Laffer Curve may move around some depending on conditions and what sort of tax you’re talking about, but, in terms of income tax rates in the US right now, we’re way to the left of that peak. Laffer is a tree falling in the woods, or, at least, he should be.

  • mw

    @whq What browser are you using? I am not seeing it (Firefox), but I’ve seen this happen before when I cut and paste from my blogger posts. I can probably fix it, but I need to see the problem.

    EDIT: Ok, I see the problem in Explorer. My bad. I think it’s fixed now. I left an open tag on the small font “x-post” link at the bottom of the post. For some reason Firefox and Chrome corrected it on their own and explorer let it leak into the rest of the blog. Sorry about that.

  • Chris

    I see MW is still harping on about the “divided government”. I think this latest bout dysfunctional hysterics over a manufactured crisis has shown everyone else but MW how false his beliefs are.

  • cranky critter

    WHQ, what I said was that connecting the dots is iffy according to the Laffer curve. Because we’re talking about a moving target. It’s hard to know ahead of time whether a tax change will increase or decrease overall revenue. And that was a related to a discussion about whether tax revenues would go up when GDP goes up. Which is likely.

    I’ve never said I was opposed to tax increases on top earners. To the contrary, repeatedly. No real clue what’s gotten you panties atwist here.

  • cranky critter

    Chris, I disagree. I think you’re just saying “x is a bug” and MW is saying “x is a feature.” The divided government hypothesis (DGH) acknowledges that whatever gets done will get done in an ugly and contentious fashion, but that ugly compromises will occur and occur almost exclusively only on the most important of concrete matters. Like, say, a 40% operating deficit.

    This is exactly what we’ve gotten. So, what about this episode appears to you to be counterfactual? I don’t see it. Please explain.Do you think we’d have gotten MORE deficit reduction without a divided government?

  • WHQ

    Panties? I don’t even wear panties!

  • mw

    Thanks Cranky. I know you do not subscribe to the voting heuristic, but at least you understand it.

    I’ll make one other point. The voting heuristic is based on expectations set by historical fact – that under a divided government we almost always get certain policy objectives/results. The aesthetics and niceties about how we get to those results are completely irrelevant. I really do not care that many on the right and left had their delicate sensibilities offended by the process whereby we arrived at this bipartisan compromise. The fact is – We arrived at a truly bipartisan compromise.

    I’ve frequently linked to exactly what the policy objectives/results that history tells us we should expect under divided government and I’ll do it again now. They are linked here:

    The objectives I vote for:
    “Federal government should be limited in scope, provide for common defense, protect and respect individual rights, spend and tax in a fiscally responsible manner, provide effective oversight of elected and appointed representatives, legislate carefully and slowly, and pass only laws that are tempered in the fire of partisan debate. I vote in the hope and expectation of moving our government and country toward these objectives.”

    I think I’ll rename this “The Dividist Creed”. Since I am frequently attacked as dogmatic, I might as well document and embrace my dogma. I need to rewrite and update that post anyway – it’s almost four years old.

    The point is, I do not see movement toward these objectives under either One Party Republican or Democratic Rule. So – why would I vote for that? I do see movement toward these objectives under divided government. When I vote for divided government, and my “team” wins, to a large extent I get the policies I voted for.

    How many of you can say that?

  • mdgeorge

    Just out of curiosity, does anyone know how much of the deficit is directly related to direct automatic recession spending, like unemployment benefits?

    It’s not just that a better economy means a stronger tax base – there are other real costs to a weak economy, and I continue to believe that large spending cuts will hurt that. It looks like the deal is at least back loaded, so that’s good.

  • kranky kritter

    Yeah, there are almost NO upfront spending cuts. Everyone ought to remember that when it comes time to place blame for the still-lagging economy.

    _AND_ remember that the “cuts” are actually reductions in growth rates, not actual cuts, And those numbers being called cuts even though they aren’t? They’re from a baseline that’s been substantially inflated from 2007-2010. In trillions starting 1n 2007, federal outlays went from 2.73 to 2.98 to 3.52 to 3.72. Meanwhile, revenues went 2.57, 2.54, 2.10, 2.17.

    That’s right, from 2007 to 2010, revenue decreased by about 15%. Meanwhile, spending went up 36%. Notice that the stimulus package doesn’t even show up as a one year bulge that goes away. It becomes the new baseline. There’s no 800 billion increase in one year followed by an 800 billion decrease. It was spread out, _and_ added to the baseline.

    One ironic note worth mentioning. I got these numbers by going to my favorite handy government data reference source, the statistical abstract of the United States. Tragically, funding is planned to be cut for it. I guess it’s not a good enough job creator to emerge unscathed from the new austerity.

  • Jim S

    KK, you beat me to it by pointing out that the entire crisis was created by divided government. And thanks to that division the solution proposed isn’t much of a solution and won’t be when the deadline for the “trigger” comes. The Tea Party conservatives probably wouldn’t have gotten enough votes in the general election without the economy and jobs as issues. Now that they’ve shown they aren’t really all that interested in doing anything about that issue they might have problems come 2012 in the House.

  • acanthosis nigricans

    The agreed spending cuts are not enough if no revenue generating measures (taxes) are introduced…We’ll go over this drama again sometime in the next few years.

  • Chris

    Without a divided government:
    Republicans in majority – minor and inconsequential spending cuts, because in reality they’re too big of pussies to actually cut entitlements where necessary to make up for their handouts to the rich.

    Democrats in majority – elimination of tax cuts for the wealthy, updates to the tax code for capital gains, minor spending cuts.

    What we have instead is a half-assed solution to the problem. Oh yes, the great divided government worked so well. It will only work when both sides are actually interested in solving problems.