As the outlines of the deal start to become clearer, I still don’t think this is that bad of a deal. If you stop dreaming about stimulus for a moment and look at what is on the table, it’s unlikely to result in some fiasco. First, there’s the $900 billion in cuts that Biden signed off on during the negotiations. These cuts are probably specifically designed to do little harm to the economy over the next two years, just like the cuts in the spring. Then there’s the joint committee, tasked with raising another $1.5 trillion over the next decade. If it fails, automatic cuts will happen that affect Medicare providers and the Pentagon equally on a one-to-one basis. Additionally, programs designed specifically to protect the poor and veterans are protected.
Much attention will be focused on the debt committee and the prospect that they will urge cuts in Medicare, Social Security, and Medicaid. They probably will look to give a haircut to those programs, but the Pentagon will be on the chopping block as well. I honestly expect modest changes that are pushed out far into the future, and I always expected some modifications. I don’t think we’re going to see a major facelift.
To me, there are two big downsides. The first is that we’ve now established a precedent that we will negotiate with terrorists, so we’re going to be living with this bullshit for a long time. It’s easier to let them shoot the hostage when the result is the National Zoo is closed than when it destroys the global economy, so expect more pushback over the budget.
The second downside is that we couldn’t extract any stimulus at all, as far as I can tell. So, this won’t hurt the economy much, but it certainly isn’t going to help it.
Politically, we came out far ahead in this battle. We’ll see how we come out around Thanksgiving when the debt committee presents us with their work.
And, hey, at least the debt didn’t increase so we can stop wasting money on more interest payments. Even though I understand the need to deficit spend in times of high unemployment, there’s still nothing I like paying for less than interest.