The Economist had a thing or two to say about the debt deal that was reached this week. The article “Nuts and bolts” asserts:
As for long-term fiscal consolidation, the deal also falls short. Total deficit reduction of $2.4 trillion is less than the $4 trillion that bipartisan groups and political leaders had more or less agreed was necessary to put the debt on a meaningful downward path relative to GDP.
The article “On the debt-ceiling deal” quotes Cato Institute’s Chris Edwards regarding a graph he created on the CBO scorecard.
Spending isn’t being cut at all. The “cuts” in the deal are only cuts from the CBO “baseline,” which is a Washington construct of ever-rising spending. And even these “cuts” from the baseline include $156 billion of interest savings, which are imaginary because the underlying cuts are imaginary... The federal government will still run a deficit of $1 trillion next year. This deal will “cut” the 2012 budget of $3.6 trillion by just $22 billion, or less than 1 percent.
The article concludes:
Maybe Washington’s game of debt-ceiling chicken went on too long for comfort, but the resolution of the game looks a lot like a pragmatic compromise to me. Unless the bill fails, which it might, it looks like our democracy will have raised the debt ceiling, didn’t really cut a thing, passed off responsibility for substantial deficit reduction to a “super committee”, which will either come up with a plan that does not bind the future executive and legislature or will trip a “trigger” that won’t go into effect until after the next election, and then, again, will go into effect only if the government of the future wants it to go into effect.