Budget chronicles

Not the worst deal in history. But certainly not a victory for Obama.

Ok — I was wrong. There finally was a deal; and President Obama did not have to shut the government down. Although I am convinced the President and the nation would have been better off if he had shut it down in order to avoid default. As matters now stand, those who were willing to risk all of this — the House Republicans — have not experienced any consequences except being yelled at by their own Speaker Boehner.

As to the deal itself, about the best you can say is that the combined forces of American governance — both parties, both Houses and the Presidency (led by the Republicans in the House of Representatives) — took us to the brink of a “self goal” and then at the last minute rescued the rest of us from the catastrophe they damn near caused. However the Financial Times overstated the point a bit when it said yesterday that this is not the worst last minute deal in history, the 1938 Munich Accord was certainly worse.

The reality always was that all this was ever going to be – as I’ve said repeatedly – was a stop-gap, a momentary pause in the budget policy wars. And that’s all that it was. It leaned much more in the Republican Congress’s direction in part because that side had a cohesive minority group willing to be completely irresponsible. But that’s not the only reason. First, there was no real alternative. I may have missed it, but I did not see the group of Democratic Senators or House members with a compelling centrist or left alternative plan. Second, the White House was simply not strategic in thinking through how we would reach this point, and what we would do when we got here. More on that later.

But here are some concluding points to take away: this deal

• Does not come close to solving our debt/deficit problems;
• Is not an economic plan: why is it that economic growth has not become someone’s battle cry?
• Does not end the drama — we will have a government shut-down confrontation in late September, and probably when the new Commission composed only of elected members of the House and Senate are unable to agree on anything;
• Has accelerated the sense of dismay normal Americans have when they watch Washington and our current political structure in action; and
• Reduced President Obama’s support levels for the remainder of this election cycle by about 5 points or 10%.

Roosevelt Institute Senior Fellow Bo Cutter is formerly a managing partner of Warburg Pincus, a major global private equity firm. Recently, he served as the leader of President Obama’s Office of Management and Budget (OMB) transition team. He has also served in senior roles in the White Houses of two Democratic Presidents. This post originally appeared at New Deal 2.0.

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Posted by New Deal 2.0 on Aug 2 2011. Filed under New Deal 2.0, the reading room. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry