The politics of extortion

The deal Congress passed this week to raise the debt ceiling is bad for America and a defeat for President Obama, but what could he do but sign it? The cold, hard fact was that a small group of House extremists held the economic health of the country hostage. Rather than compromise, they threatened to take the nation down, and Obama couldn’t let that happen.

Part of it was his fault. He didn’t see this coming. Back in December, when he agreed to extend the Bush tax cuts, he should have conditioned it on an immediate increase in the debt ceiling. But who could have foreseen then that ideological extremists in Congress would be willing to risk America’s credit rating and plunge the country and the world back into recession in order to get their way?

Yes, the federal debt must be decreased. Nobody disagrees with that. But right now the spending reductions called for in this deal are going to put more people out of work and prolong and worsen a fragile recovery. That’s why the stock market went in the tank as soon as the deal was done. It’s a vicious cycle: Less government spending means more unemployed, and that means less demand for goods and services. That in turn means less production, which means fewer jobs and, thus, less tax revenue going to pay off the national debt.

The good news is that, under terms of the deal, the serious cutting won’t begin until 2013, giving the economy a little breathing room. It also exempts Medicaid and Medicare, though it ultimately will result in major cuts in education, transportation and other vital services that provide jobs, as well as an end to extended unemployment benefits. And it supposedly takes $350 billion out of defense and homeland security, though the bill is confoundingly fuzzy on the details.

Credit Obama with averting total catastrophe, but he’s paying for it. Liberals think he’s sold out, and conservatives think he can be rolled. Polls show that a majority of Americans believe in a balanced approach—spending cuts coupled with a revenue increase—to reducing the budget deficit. The president needs to fight for them.