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The Utter Meaninglessness of the Debt Ceiling Deal

Twenty-six years ago—as part of the price for raising the federal debt ceiling to a shocking $2 trillion—Congress, in a wave of fiscal self-flagellation, approved the Gramm-Rudman bill. If a spendthrift Congress failed to meet prescribed deficit targets, then Gramm-Rudman would slice the budget with the across-the-board subtlety of Sweeney Todd. 

That was the theory anyway, although legislative maneuvering left about half the budget (including Social Security, Medicare, and Defense contracts) off limits to meat-cleaver deficit reduction. Still, during the late 1980s under two Republican presidents, the White House and Congress used a series of gimmicks to make sure that the Gramm-Rudman slicer was never turned on. As New Hampshire Republican Senator Warren Rudman later complained in his autobiography, Combat, “The Gramm-Rudman medicine was too strong for the Bush administration to swallow, so – hand in hand with a complaint Congress – they eagerly scrapped it and returned to the path of least resistance.”

The Gramm-Rudman precedent is the only thing that leaves me with a glimmer of long-term optimism as Barack Obama and the congressional Democratic leadership have signed on to what appears to be the worst deal since a cash-strapped Napoleon proposed the Louisiana Purchase. The hope is that once confronted with actual cuts to actual programs—instead of numbers games like pious promises to slash $2.5 trillion in federal spending over the next decade—Congress will return to its legendary history of budgetary subterfuge. No matter what the precise trigger mechanism turns out to be when the debt-ceiling hostage drama finally comes to its sad conclusion, adroit legislators can probably come up with a clever way to get around it. Remember all the savings in the plan unveiled Sunday night are abstract numerical targets rather than changes in specific programs or legislative moves like permanent adjustments to the Social Security cost- of-living formula.

What should matter the most are all the additional budget cuts than the triumphant Tea Partiers will exact between now and the 2012 election. Not only is trimming federal spending in the midst of a protracted economic downturn Hoover-esque, but there are also unlikely to be any gambits to mitigate the short-term fiscal suffering. That, unfortunately, is the price that the Democrats and the nation will have to pay for their 2010 electoral wipeout.

Yes, Obama and the Democrats do have one powerful lever—all the Bush tax cuts slated to expire at the end of 2012. It is easy to theorize that Obama can use continuing the tax breaks (for those earning less than $250,000) as a wedge to win post-election concessions from Republicans in Congress. But I worry that the GOP will turn making all the Bush tax cuts permanent into a campaign issue—and enough skittish Democrats in Congress will go along before November 2012 to deprive Obama of his best bargaining chip.

But when it comes to this week’s your-money-or-we-default budget deal, I suspect that it will prove to be a short-term expedient rather than a long-term grand bargain. The 2012 election will change everything—for better or for worse.

If Barack Obama wins a second term, he theoretically will be in a much stronger bargaining position, free to credibly threaten vetoes and no longer obsessed with placating independent voters. The risk, of course, is that Obama may continue his infuriating habit of conceding points of principle to the Republicans and then vainly quibbling about the details. Still, a Obama victory may bring congressional Democrats to the cusp of winning back the House and allow them to narrowly cling to control of the Senate.

The real transformation, though, is apt to be in the temperament of congressional Republicans. Revolutionary zeal is difficult to maintain through two campaign cycles. Some of the more fanatical members of the Class of 2010 will undoubtedly lose next year and others, after close calls, will suddenly develop an acute sense of electoral self-preservation. Failure to dethrone Obama, despite nearly double-digit unemployment, will presumably make Republicans more concerned with the polls and less fearful of threats from Grover Norquist.

Under this scenario, both the White House and Congress will be tempted to return to the kind of budgetary gamesmanship that de-clawed Gramm-Rudman. Everything in Washington these days can be renegotiated—especially budgetary deals enacted against the threat of defaulting on the national debt. Targets can slip a few years, fiscal emergencies can be declared, and escape clauses can be belatedly discovered.

If, however, a Republican moves into the Oval Office in January 2013, then the current debt-ceiling fight may be remembered as the good old days of free-spending liberalism. A GOP president will almost certainly also be blessed with control of both chambers of Congress. Flush with victory and immune from any legislative check other than a filibuster by timorous Democrats, the new president will have the power in 2013 to permanently reshape entitlement programs, repeal the Obama health-care plan, and downsize federal spending.

Obviously, that would be a draconian penalty for losing the 2012 election. But that is also the risk that comes with electoral politics—sometimes the stars align for one party as they did for the Democrats in 2008.

On Sunday night, however, as the debt-ceiling crisis entered its desperate hours with no guarantee that any blue-ribbon deal can make it through the House, the real threat was default rather than the budget cuts slated to take effect over the next decade. Obama has badly played what always was a weak hand. But nothing in the latest showdown necessarily is permanent, unless the Tea Party zealots destroy the credibility of the U.S. government and the risk-free reputation of the dollar.

Walter Shapiro is a special correspondent for The New Republic. Follow him on Twitter (lucky you).