did Obama lose the debt ceiling debate?

Much of the media believes that President Obama has emergedthe loser” of the debt ceiling negotiations. Although that might be the simplest (and therefore easiest) conclusion to sell to the public, it is not accurate.

Let’s consider the opening negotiating positions of Obama and congressional Republicans. Both wanted to substantially reduce the deficit (Obama said $4 trillion in 12 years, Republicans said $6 trillion in 10 years).

Obama’s first priority in the debt ceiling negotiations was to raise the debt ceiling. In addition to that, he wanted to close the deficit. His plan would have made a fairly large amount of cuts to discretionary spending, including cuts from the pentagon’s budget. His plan also would have made some cuts from Social Security, Medicare and Medicaid, while basically preserving the fundamental nature of those programs. Obama also would have increased revenue by $1 trillion, specifically by repealing the Bush tax cuts for those making more than $250,000 a year and closing tax loopholes.

The initial Republican negotiating plan is best represented by the Ryan budget. That plan would have included no revenue increases. It would have included major cuts to discretionary spending, including some to defense (although a smaller amount than those in Obama’s plan). Much of the savings would have come from overhauls of Medicare and Medicaid which would have substantially changed the nature of those programs. A large number of congressional Republicans did not want to raise the debt ceiling at all, even if they could have gotten everything they wanted.

So, what happened? Well, they raised the debt ceiling. That is a win for Obama. They made initial cuts of $1 trillion from cuts in discretionary spending, split evenly between defense[1] and non-defense spending. Cuts to discretionary spending were in both plans. Republicans wanted more cuts from non-defense, Obama wanted more from defense. So, the cuts were really a wash.

Regarding the conditions for negotiations this November, those also come out neutral. Revenue increases are disadvantaged in those negotiations (good for Republicans), but the triggers include major defense cuts (good for Obama).

The vote on the Balanced Budget Amendment is worthless. It won’t pass and has no teeth. It is neutral.

So, at the end of the day, what was passed was everything that both Obama and congressional Republicans wanted. Republicans wanted some cuts to defense. Obama wanted some cuts to non-defense discretionary spending. The majority of Republicans wanted to increase the debt limit.

In other words, about a quarter of Obama’s deficit reduction plan was exactly the same as the Republicans’ deficit reduction plan. That quarter is what passed. And they also increased the debt limit.

It is true that Obama didn’t get everything he wanted, but he didn’t really give up anything that he didn’t want either. He just got a portion of his plan enacted and increased the debt limit. I fail to see how so much of the media believes that not only did Obama lose, but that he got lambasted.

[1] Technically “defense” usually just refers to the pentagon. In this case, the cuts were split between “security” and “non-security.” “Security” includes defense, homeland security and other similar departments.

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13 Responses to did Obama lose the debt ceiling debate?

  1. DeMark says:

    Maybe you should tell Krugman your thoughts…

  2. Suszek says:

    I know Krugman and pretty much everyone else disagrees with me on this. However, Krugman is wrong. For starters, Krugman got the economics wrong. He says we are in a “deeply depressed economy.” That is not the case. We might be in a stagnating economy, but we are seeing consistently positive (though disappointing) growth. It is plausible that part of the problem is the threat of a downgrade of our credit rating. So, there is a credible argument to make that reducing the medium-term deficit will help the economy now.

    In addition, Krugman is more liberal than Obama. So, what Krugman would have wanted does not equal what Obama wanted. If Krugman had been negotiating and the result was the bill that passed, it would have been a loss for Krugman. However, a Krugman loss does not equal an Obama loss.

  3. villagebear says:

  4. Jeff Crook says:

    He caved, simply put. Want to raise revenue, close the tax loopholes. Make sure all corporations and all Americans pay their share. We need a flat tax system. Why should the rich and the corporation reap the benefits the U.S. military mite which protects the interests of these 2 groups but is paid for by the middle class? in addition, if you pay no tax because you sat on your behind and leeched off the system and received other “entitlements” you get NO TAX REFUND!Bad enough those of us who work pay to put a roof over your head, food on your table and most likely a cell phone in your hands but you are going to get a refund when you didn’t contribute 1 thin dime? That has to stop!

  5. Suszek says:

    Well, the flat tax system is a Republican initiative. Currently, rich people pay higher percentages of their incomes in taxes than the middle class does. There are many exceptions, which reduces the amount that everyone actually pays. However, a flat tax system would lead to a larger percentage of the budget being funded by the middle class.

    Obama definitely does not support a flat tax system. So, it doesn’t make sense to argue that he caved because he did not achieve a flat tax system.

  6. Jeff Crook says:

    No, Andy, you are wrong. No loopholes, flat tax is the way to go. The rich more often than no end up paying $0, of close to it. Corporations pay $0. Quit subsidizing big oil too. If you can post records profits every year, you can pay more in taxes of uncle Sam should step in and say, if you casn drill and refine oil for $1.50 gallon, you are entitled to make .30 cents profit, no more! The alternative would be for government to take over the oil industry.

  7. Suszek says:

    Corporations only pay $0 in taxes when they fail to make a profit in a given year, or make only a small profit that is cancelled out by a tax credit. However, when corporations make large profits, they pay taxes on those profits.

    Also, rich people pay taxes. I would love to see some proof for your claim that the majority of them pay $0 in taxes.

  8. Jeff Crook says:

    I don’t need proof, everybody knows its true. You can ask anyone, just don’t ask a rich person.

  9. Suszek says:

    In fact, here is an even better article. As the article describes, the effective tax rate on corporations in the United States (meaning the rate actually paid after deductions and credits are considered) is 27.6%. As the article also points out, that is a relatively high rate when compared to the rates in other developed countries.

  10. Jeff Crook says:

    Surely you don’t believe everything you read, do you? When I hear Ron Paul speak, I believe him because he wouldn’t say things that are untrue. when I hear the big news reporters like on Meet the Press, or on 60 Minutes talk about this stuff they have the hard facts to back up their statements and/or questions when they pose this stuff to the rich and heads of major corporations and those on the receiving end never have an answer. Why? I would like to get documentation from the IRS that would back up these assertions but I doubt they keep any stats on this subject. The middle class is and always has paid a larger percentage of its income to taxes than the rich and corporations have, everybody knows that.

  11. Jeff Crook says:

    From the link you provided: “Those with accountants or lawyers to work the system can end up paying no taxes at all”.

    If we all paid a flat rate, those of us that do pay would pay less. Everyone would benefit except those that pay nothing now.

  12. Suszek says:

    I’m sorry, but the facts just don’t align with what you’re saying. As this article illustrates, the effective tax rate for rich people is 19%. That means they are actually paying that 19%, even after deductions and credits. It is hard to see how more than half of the federal income from income taxes could come from the top 5% of earners if rich people pay less in taxes than the middle class, as you claim. That statement, comes from the article I cited, and is supported by statistics from the well-respected Congressional Budget Office.

  13. Suszek says:

    I do not believe everything I hear. That is precisely why I fact-check things I hear at quality sources. You appear to support your claims by saying things like, “everyone knows that.” Personally, I would rather rely on sources like Politifact and the Congressional Budget Office than no sources at all.

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