Obama surrenders on debt ceiling dealBy Askia Muhammad -Senior Correspondent- | Last updated: Aug 11, 2011 - 1:08:22 PM
Republican and Democratic leaders in Congress reached agreement with President Barack Obama to raise the limit on U.S. borrowing with the promise of more than $2 trillion in spending cuts, potentially forestalling the default, with barely one day remaining before the federal government would have exhausted its limit on borrowing money, thereby defaulting on the “full faith and credit of the United States”—literally the “gold standarad” for the entire world's economic order.
Some conservative leaders gloated over their triumph, while liberals—including both the Congressional Black Caucus (CBC) and the Congressional Progressive Caucus—denounced the agreement because the deal excludes any form of increased revenue such as taxes on the rich and on wildly profitable corporations, and because of the severity of the proposed cuts to vital social services.
“Despite Democratic control over the White House, despite Democratic control over the Senate, despite overwhelming opposition from the American people, a small minority of the members of the Republican-controlled House have successfully pushed an extreme right-wing agenda onto the American political landscape,” Sen. Bernie Sanders (I-Vt.) said in a speech on the Senate floor July 31.
“It is an ideology which believes that, despite the fact that the rich are getting richer, the middle class is shrinking, and poverty is increasing, all of the burden for deficit reduction should rest on working people,” Sen. Sanders complained.
“This deal trades people's livelihoods for the votes of a few unappeasable right-wing radicals, and I will not support it,” said Rep. Raul Grijalva, (D-Ariz.), co-chair of the Progressive Caucus, according to published reports.
President Obama urged lawmakers to “do the right thing” and approve the proposed agreement. If enacted, the president continued, the agreement would mean “the lowest level of domestic spending since Dwight Eisenhower was president” more than half a century ago.
“Now, is this the deal I would have preferred? No,” Mr. Obama told reporters July 31 at a rare Sunday evening press briefing following an intense weekend of negotiations with House and Senate leaders. “But this compromise does make a serious down payment on the deficit reduction we need, and gives each party a strong incentive to get a balanced plan done before the end of the year.”
House Speaker John Boehner (R-Ohio) who was pushed further and further to the right during weeks of on-again, off-again White House negotiations by the Tea Party contingent of the Republican Caucus, declared victory. “It isn't the greatest deal in the world, but it shows how much we've changed the terms of the debate in this town,” Mr. Boehner said on a conference call, according to GOP officials quoted in published reports. He added the agreement was “all spending cuts. The White House bid to raise taxes has been shut down.”
GOP leaders Boehner and Senate Republican leader Mitch McConnell (R-Ky.) dealt directly with the White House, represented by Vice President Joe Biden.
The final, face-saving battle for the Democrats, was fought over Pentagon spending cuts, with Democrats emerging with $350 billion in reduced defense spending—cuts which would have likely been eventually agreed to, anyway.
House Democratic Leader Nancy Pelosi, (D-Cal.), was noncommittal about the agreement. “I look forward to reviewing the legislation with my caucus to see what level of support we can provide,” Ms. Pelosi said in a written statement. But Democratic officials predicted she was unlikely to do anything to try to sabotage the deal.
The increased borrowing authority includes $400 billion that would take effect immediately and $500 billion that Mr. Obama could order unless specifically denied by Congress. That $900 billion increase in the debt cap would be matched by savings produced over the coming decade by reducing spending on federal agency budgets passed each year by Congress.
A special 12-member, bipartisan committee would be established to find another $1.5 trillion in additional spending cuts, probably taken from benefit programs like farm subsidies, Medicare and the Medicaid health care program for the poor and disabled. Republicans are confident that the panel will not approve any tax increases.
Agreements reached by the panel would be voted on by both House and Senate—and if the panel deadlocks, automatic spending cuts would take place across much of the federal budget.
Social Security, Medicaid and food stamps would be exempt from the automatic cuts, but payments to doctors, nursing homes and other Medicare providers could be reduced, as could subsidies to insurance companies that offer alternatives to government-run Medicare.
If President Obama got anything he said he wanted out of the final agreement, it's that this round of budget cuts and debt-ceiling increases will last until 2013 after the next presidential inauguration. Mr. Obama is seeking re-election, in a climate where Democrats are increasingly expressing disappointment in his leadership and in the appearance that he has surrendered too much to Republicans and to wealthy, corportate interests. Unemployment remains high, home foreclosures are increasing, and the promise that when rich corporations were bailed out of their self-created financial chasm in 2008-2009, they would put Americans back to work—that promise has not been realized. Instead, companies have used the cash they received from the federal government to pay huge salaries to their top executives, and to buy back company stock, thereby increasing its value, and earning them larger pay bonuses.
This debt-ceiling deal is clearly a part of the Obama re-election strategy. “The activist liberal base will support Obama because they're terrified of the right wing,” Robert Borosage, co-director of the liberal group Campaign for America's Future told The New York Times. But he said, “I believe that the voting base of the Democratic Party—young people, single women, African-Americans, Latinos—are going to be so discouraged by this economy and so dismayed unless the president starts to champion a jobs program and take on the Republican Congress that the ability of labor to turn out its vote, the ability of activists to mobilize that vote, is going to be dramatically reduced.”
Ironically, as the final details on the debt-ceiling agreement were being worked out in Washington, one corporation—Apple, the manufacturer of the iPod and the iPad—revealed it had more money on hand than the United States Treasury.
In the hours before the U.S. borrowing limit deal was reached, the U.S. Treasury had a balance of just under $73.8 billion in cash and securities. Compared to Steve Jobs's Apple, the iPhone manufacturer had a 3 percent advantage on the U.S. government with $76.2 billion in cash and marketable securities on hand, according to June statements.
President Obama promptly singed the bill after the Senate passed the legislation, 74 to 26 on August 2.