1/2/2013 3:06 PM ET|
More bruising budget battles are coming
Think the fiscal cliff crisis was nasty? The political infighting over the debt ceiling and the budget could be just as bad, if not worse.
On Monday, the U.S. maxed out its legal ability to borrow money to fund its daily operations, known in Washington, D.C., circles as the debt ceiling. Until recently, Congress extended the debt ceiling, which now stands at about $16.394 trillion, as a matter of routine. Now it is anything but routine, especially since the rise of the Tea Party, which has a maniacal focus on reducing the federal debt and deficit.
Treasury Secretary Timothy Geithner can prevent the government from hitting the debt ceiling for about two months by some bureaucratic maneuvers, but these moves can only delay the inevitable, which leads us back to another fiscal cliff-style soap opera.
The eleventh-hour deal that averted $600 billion in tax hikes and government spending cuts didn't please many legislators -- although the that fact a deal got done did please Wall Street, which rallied sharply Wednesday on news of the deal.
Erick Erickson of the influential conservative blog RedState was especially irate, arguing that House Speaker John Boehner and Senate Minority Leader Mitch McConnell sold out the Republican party and that "the Republican establishment in Washington, DC should be burned to the ground and salt spread on the remains." Amy Payne of the conservative Heritage Foundation lamented that the deal has a 10-to-1 ratio of tax increases to spending cuts.
Progressives were not pleased either. Veteran Senator Tom Harkin, D-Ind., lamented what he called a "very bad deal" because it fails to do enough to create jobs and does not generate enough revenue for the government. Robert Reich, a former Labor secretary, argued that the Democrats in Congress and the White House should have gotten a deal on the debt ceiling when they were negotiating the fiscal cliff.
Lines are already being drawn for the next fiscal battle. In his brief address to the press last night, President Obama said he wouldn't "tolerate" another battle over the debt ceiling similar to the one that almost crippled the government in 2011 and resulted in the U.S. losing its AAA credit rating. That may be wishful thinking.
Although investors are pleased that a deal was reached, that sentiment will change once Wall Street realizes that Washington is as dysfunctional as ever. Let's not forget the annual rumble over the federal budget, which may be especially tough this year. And an equally nasty fight over the debt ceiling is about to start.
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