Agreement reached

Who could have seen it coming?

...There won't be a default, because they'll come to some agreement that prevents it. No one wants it, so it won't happen. Much ado about, well, not nothing, but about something that's not going to happen.

- Me, July 15

Tonight:

Senate leaders will meet with their caucuses Monday morning to present a bipartisan agreement to raise the debt limit and cut spending between $2 trillion and $3 trillion.

Both Senate Majority Leader Harry Reid (D-Nev.) and Republican Leader Mitch McConnell (Ky.) endorsed the deal on the Senate floor.

“I am relieved to say that leaders from both parties have come together for the sake of our economy to reach historic, bipartisan compromise that ends this dangerous standoff,” Reid said.

“The compromise we have agreed to is remarkable not only because of what it does, but because of what it prevents: a first-ever default on the full faith and credit of the United States,” he said.

Reid said he would present it to his Democratic colleagues at 11 am and expressed confidence it would pass Congress. Reid said he would have to meet with his colleagues before giving the final green light.

President Obama took the podium in the White House briefing room a short while later to announce that the leaders from both parties in the Senate and House had accepted the deal.

Debt-Limit Harakiri

The Wall Street Journal thinks that Mitch McConnell's plan may be the best that the Republicans can do right now:

This is the political context in which to understand Mr. McConnell's proposal yesterday to force Mr. Obama to take ownership of any debt-limit increase. If the President still insists on a tax increase, then Republicans will walk away from the talks.

Mr. McConnell would then let the President propose three debt-limit increases adding up to $2.5 trillion over the coming months. Senate Republicans (with Majority Leader Harry Reid's cooperation) would use a convoluted procedure to vote for three resolutions of disapproval on the bills. Mr. Obama could veto the resolutions and 34 Democrats could vote to sustain. The President would get his debt-limit increase, but without Republicans serving as his political wingmen.

The hotter precincts of the blogosphere were calling this a sellout yesterday, though they might want to think before they shout. The debt ceiling is going to be increased one way or another, and the only question has been what if anything Republicans could get in return. If Mr. Obama insists on a tax increase, and Republicans won't vote for one, then what's the alternative to Mr. McConnell's maneuver?

I haven't decided yet. I'd rather not see the debt ceiling go up at all. If we have not yet reached the point-of-no-return, we seem to be getting perilously close to it. Allowed the government to keep increasing the debt is deeply, fundamentally bad. On the other hand, default is unacceptable. (When and how that default would occur is not clear to me. While people are talking about August second, there are several sources indicating that there is, or is expected to be, sufficient funding in the treasury to deal with all required payments at least through the end of the month.)

The problem, of course, is that the party on the other side of the negotiating table is fundamentally unserious, and not at all interested in addressing the real source of the problem - the spending which has gone on over the past 10 years, the spending which has escalated over the past four years, and, most importantly, the spending to which the government is already committed for the coming years.

Let me acknowledge, here and now, that tax revenues are going to have to go up to dig us out of this situation. Whether that's through the closing of loopholes, the raising of rates, either nominally (by raising rates) or effectively (by shifting brackets) or miraculous growth, the public debt is going to require more revenue to close than the government is currently getting. But the big problem isn't revenue - it's spending. Until serious attempts are made to get the spending half of the equation improved, I strongly oppose any attempts to raise revenue. The inevitable result of negotiations like the current ones are agreements on tax hikes now and spending cuts in the future, and the spending cuts never actually happen. That's how we got to today, and that's what we cannot afford to do going forward.

And the President and the rest of the Democrats and their sycophantic supporters in the mainstream press haven't the slightest interest in cutting spending (except for maybe the military). That's the source of the problem. As the WSJ editors said,

We've never thought the debt ceiling was the best leverage for a showdown over the entitlement state, and now it looks like Mr. Obama is trying to use it as a way to blame the GOP for the lousy economy.

And if they can't find a way to improve the fiscal situation, McConnell's plan at least lets the Republicans place the blame where it belongs.

McConnell

Over in The Corner, Mark Hemingway has Senator Mitch McConnell's statement on the floor of the Senate today. It's worth reading.

A couple of excerpts:

The American people were ready to support an economic plan that would work and that wouldn’t spend money we don’t have on things we don’t need. So were Republicans in Congress. What many of us did not expect, however, was that President Obama wouldn’t be the author of that plan. In an odd turn of events, the bold economic plan that President Obama called for ended up being written by some of the longest-serving Democrats in the House of Representatives — and it showed. Tasked with writing a stimulus bill that was timely, targeted, and temporary, Democrats in the House produced an enormous spending bill that was none of the above.

...

In every version of the stimulus we’ve seen, wasteful spending has attracted the most attention. But even more worrisome to many is the permanent expansion of government programs. One estimate puts the cost of this expansion at nearly $1 trillion over the next decade.

Even the Committee for a Responsible Federal Budget, which counts Obama economic advisor Paul Volcker and former Clinton Budget Director Alice Rivlin as directors, has been highly critical of this aspect of the bill. Last week, CRFB President Maya MacGuineas pointed out that many of the bill’s spending projects squander resources. But even more troubling, she said, are the programs that aim to permanently expand government. As MacGuineas put it, ‘extending our borrowing beyond the economic downturn will make our already-dismal fiscal picture far, far worse.’

Still, some Democrats continue to defend the bill. Asked about its apparent lack of focus, one veteran Democratic Congressman said, ‘So what.’ One Senate Democrat called $16.4 billion in the bill ‘a trifle.’ Another Democrat senator said that by inserting a $3 billion project of his own, he was just ‘fiddling at the edges.’ Another said that $50 billion was ‘not going to make the difference to the economy.’ Most people cringe at a 50 cent increase in the cost of bread. Senate Democrats shrug at taking $16 billion from the taxpayers for a project they can’t even assure us will work.

...

All of us want to strengthen the economy and create and save jobs. Republicans believe the best way to do it is to first fix the problem, which is housing. Then we need to let people keep more of what they earn. Throughout this process, Republicans have been guided by the belief that the desire to ‘just do something’ shouldn’t be an excuse to waste tax dollars. That’s why we proposed a plan that was more focused on the problem and which didn’t waste money — in short, a plan that was timely, targeted, and temporary. Sadly the bill before us is none of these things