Winners and Losers in the Non-Debt Non-Deal

Paul Campos at Lawyers, Guns and Money:

There’s no reasonable defense of the substance of the debt deal on even vaguely liberal, let alone progressive, grounds. (The extent to which the Democrats were stuck with that substance because of a combination of procedural perversity and GOP lunacy, as opposed to their own ideological bad intentions and political incompetence, is a separate topic).

A couple of notes:

(1) The claim that the deal doesn’t cut Medicare benefits gets those who make it an F in Econ 101. Cutting reimbursements to providers is a functional cut in benefits.

(2) It’s unfortunate that the increasingly desperate struggle to protect the most prominent features of what remains of the social safety net obscures the fact of how deep these budget cuts are in terms of the rest of the government’s functions. As Dean Baker points out, if you make the reasonable assumption that the cuts going forward will mostly exempt entitlement programs, the military, and unemployment insurance, that means that something close to a third of the rest of the federal budget is going to get cut. It would be nice to fantasize that this consists mostly of subsidies to Archer Daniels Midland and bridges to nowhere, but in point of fact the rest of the budget consists of essentially everything the federal government does that doesn’t involve direct transfer payments or killing foreigners. Given that we’re not living in 1890 any more that’s actually quite a few things that are pretty important: education, science, environmental protection, infrastructure, health and safety, the entire federal legal system, and so on.

Now on the bright side:

(1) There seems to have been a big shift in the mainstream political discourse toward the idea that the Pentagon’s budget shouldn’t continue to grow at 9% per year, as it has over the last decade. Even a lot of right wingers are making noises about cutting military spending, although who knows how long that will last the next time somebody with an Arab name kills a white person. In any case, we’re at least at a point where Bill Kristol and John Bolton are beginning to worry that we may no longer be quite as eager to invade whatever country annoys them next week.

(2) The complete ideological incoherence of the Tea Party wing of the GOP, i.e., we need a balanced budget amendment but don’t touch our Social Security or Medicare, has had no apparent effect on its political salience. I’m growing more optimistic that Bachmann has a real shot at the nomination, and that Obama will face an opponent whose platform consists of demanding extremely unpopular cuts in government spending while launching investigations into exactly what the queers are doing to the soil.

George Zornick at The Nation has more details:

In short, it’s a rout of the lower and middle classes by the wealthiest Americans. Since the deal relies entirely on spending cuts with no revenues—don’t believe the White House spin that revenues are possible, because that would require Republicans to suddenly desire them—the wealthy escape any sacrifice since very few of them rely on the government services that will be cut.

Rather, as Brookings Institution senior fellow William G. Gale writes, “low- and middle-class households have seen stagnating or declining earnings over the past few decades, and they have been hit hard in the Great Recession by the housing market collapse and the job market collapse. Now, they are being asked to shoulder—via spending reductions—all of the fiscal reduction agreed to so far.” (Yes, that Brookings Institution).

SNIP

So there are a lot of permutations for these cuts—but make no mistake about who is exposed, and who isn’t. Cuts are guaranteed, revenue is not. Here’s a quick rundown of the larger bill:

Who is exposed:

Veterans: Almost half of the first round of cuts will come from “security spending,” which includes the Pentagon budget but also the Department of Homeland Security, the State Department, and notably veterans benefits and compensation. The White House assured veterans they won’t be harmed if the trigger is pulled, but did not assure them they are safe from any of the preceding cuts. More than 2.2 million veterans have served in Iraq and Afghanistan since Sept. 11, 2001, many of whom have been seriously injured and require extensive care. The Disabled Veterans of America already has said it is “anxious” to see how these spending cuts are assembled.

Students: Graduate students would be the hardest hit, as the bill proposes an elimination of the interest subsidy on federal student loans for “almost all” of them. This means that beginning July 1, 2012, grad students will be responsible for the interest on their loans while in school and during any subsequent deferment period. Also, while the federal government currently offers subsidies for on-time payments in order to promote responsible pay-backs, they will be eliminated under the debt ceiling deal. Also, education accounts for the largest share of non-defense discretionary spending. It’s nearly inconceivable that budget-cutters won’t target that juicy budget line in making their cuts.

Seniors: As noted, Medicare is subject to across-the-board cuts in the super-committee, and if the trigger is pulled, provider payments will be slashed—though only up to 2 percent. The makeup of the super-committee and outside-the-Beltway campaigns to protect Medicare will determine a lot about the degree of cuts, but remember that inside the Beltway, the “left” side of the debate has been defined by President Obama and the Gang of Six as raising the eligibility age to 67 and/or $500 billion in cuts. So this probably won’t end well.

The poor: Again, Medicaid will be subject to cuts by the super-committee. The Republican position, articulated in the Ryan budget, is a devastating 35 percent reduction in the next ten years, even as health costs rise. (However, Medicaid is protected from any cuts if the trigger should go off). Beyond that, federal housing assistance is the fourth largest slice of non-defense discretionary spending and is thus a likely target for cuts.

The unemployed: Unlike what happened during the December showdown over the Bush tax cuts, the White House was unable (or unwilling) to secure any extension of help for the jobless. That December extension will expire at the end of this year, and this was one of the last best shots to make sure that 3.8 million people won’t lose their benefits at that point.

Who’s protected:

The wealthy: Up until very recently, Obama and most Democrats were demanding that wealthy Americans pony up for some deficit reduction. The demands were admittedly narrow, and focused on itemized deductions on people who owned private jets or multiple homes—but both groups are exempted from sacrifice under the current deal. The super-committee could theoretically approve tax increases, including ending those loopholes, but House Speaker John Boehner has already sworn that won’t happen, and it’s tough not to believe that. If the Republicans on the committee refuse to back down on revenues—as they have in every recent negotiation—Democrats on the committee will be facing Medicare-slashing trigger unless they acquiesce—as they have in every recent negotiation.

Wall Street tycoons: In his budget proposal earlier this year, Obama recommended taxing the profit share of private equity managers, venture capitalists, and other Wall Street high-rollers at the ordinary personal income tax rate, instead of at the smaller capital gains rate. No such deal was struck under the current bill, so these mega-rich traders won’t spend a penny reducing the deficit—again, unless Boehner undergoes a religious experience and appoints pro-tax, anti-Wall Street Republicans to the super-committee. (He’d have to spend a long time looking first).

Oil and gas companies: Obama repeatedly demanded that oil and gas companies lose their tax breaks, since they are raking in record profits and enjoy many deductions and subsidies in the tax code. “If we choose to keep a tax break for oil and gas companies that are making hundreds of millions of dollars, that means we’ve got to cut some kids off from getting a college scholarship (and) that means we’ve got to stop funding grants for medical research,” Obama said in June. Since those tax breaks were preserved, in hindsight that soundbite was of a prediction than a warning.

The last word to one of the six non-republicans in the Senate to vote against this abomination, Bernie Sanders:

Sanders, who has led the fight to protect Medicare, Medicaid and Social Security, and who has argued that that it is morally and economically wrong to balance budgets on the backs of working families while asking little or nothing of billionaire CEOs and multinational corporations,says the Obama-GOP deal "is not only grossly unfair, it is bad economic policy."

SNIP

"(It) is very clear that there will be devastating cuts to education, infrastructure, Head Start and child care, LIHEAP, community health centers, environmental protection, affordable housing and many, many other programs," explained the senator. "I am also concerned that when we hear that ‘everything is on the table’ in terms of what this super committee deals with it will certainly include devastating cuts to Social Security, Medicare, Medicaid and veterans’ needs, while protecting the interests of the wealthy and large corporations."

SNIP

"The wealthiest people in this country and the largest corporations who are doing phenomenally well today are not being asked to contribute one penny in shared sacrifice toward deficit reduction. On the other hand, middle-class and working families who are suffering terribly in the midst of this horrible recession are being asked to shoulder 100 percent of the human cost of lowering our deficit. This is not only grossly unfair, it is bad economic policy."

“This country needs deficit reduction, but we need to do it in a way that is fair and which will result in economic growth and job creation," says Sanders. "This proposal does neither and I will oppose it.”

Liberals know you don't destroy the economy to save it.