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The Debt Ceiling Debate – Winners and Losers

The United States Congress has brought the nation to the brink of default. In the process, the Tea Party has changed the nature of the debate in Washington over the size of the federal government and the level of federal spending. A teacher and politics-watcher outlines who wins and who loses.

Image by George Cassutto
Copyright 2011
Used with permission

The entire drama on Capitol Hill has almost played itself out. Can we assume both Houses of Congress will agree to the modified Reid plan that has the endorsement of the White House? If so, $2.4 trillion of federal budget cuts will be implemented over ten years with the promise of $2 trillion to follow in the wake of special select committee that will decide how those cuts will be carried out. Both entitlement programs such as Social Security and Medicare and defense spending are on the table. We are entering a period of American austerity in a time when the economic recovery has flat-lined and unemployment shows no sign of abating. So who comes out of the budget battle winners and who emerges as losers?

Congressional Democrats: The Apparent Losers

Even though the Senate is controlled by a slight Democratic majority, it is not strong enough to prevent a filibuster in the Senate, which requires sixty votes to end. In the House, Nancy Pelosi and her caucus have been forced to swallow a bitter pill. If they object to the deal created by the Senate majority leader and the Speaker of the House, the United States will suffer massive economic consequences as a result of the first default on its debt in the history of the Republic. If they agree to the measure, they are agreeing to draconian budget cuts that will reduce investments on traditional Democratic programs such as WIC (assistance to Woman, Infants and Children) and aid to college students in the form of Pell Grants and student loans. The possibility of growing the economy through investments in jobs, which would in turn bring in additional revenue if the economy expanded will be put on hold for a decade or more.

Can the House Democrats emerge on the other side as winners? If the majority of the American electorate disagrees with the Republican approach to deficit reduction, the House and Senate might return in 2013 with a Democratic majority in both Houses. What would stop such a Democratically-controlled Congress from repealing anything this Congress does? I don’t see anything from stopping a resurgent Democratic Party from undoing what the 112th Congress has done.

Congressional Republicans: Tea Anyone?

87 members of the Republican-controlled House of Representatives are members of the Tea Party Caucus. Most of these members are new to Congress, called “freshmen” with little or no experience in elective office. By linking deficit reduction to the debt ceiling vote, they have forced the hand of the Congress and the President to reduce federal spending far beyond what would otherwise have been enacted. Many of these members actually wanted to cause the Unites States government to default to cause the American people to reject President Obama’s re-election bid. If they vote to pass the bill, they claim that is enough compromise for them, and they feel justified in refusing to close tax loopholes on the wealthiest Americans and on the record profits of American corporations. To them, “revenue enhancements” amounts to job killing, even though most economists have asserted that tax cuts do not lead to economic growth, and that federal spending on jobs actually results in increased employment. In the end, the Tea Party got everything it demanded in the deficit reduction deal. But it may have lost the respect of the American voter because their tactics look more like obstructionism and hostage-taking. Moreover, the Republicans look like they are representing corporate America more than average main street families that are struggling to pay their own bills due to a lackluster economy and shrinking salary levels while CEOs take home taxpayer bailouts.

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