Are we heading for fiscal apocalypse, or just the usual electioneering?

As our elected leaders head into 2012 campaign mode, it's up to us, the public, to remain the calm ones. And that could be tough in the face of deep challenges such as the national debt and our involvement in Libya.

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U.S. Capitol Building

As our elected leaders head into 2012 campaign mode, it's up to us, the public, to remain the calm ones. And that could be tough in the face of deep challenges such as the national debt and our involvement in Libya.

Are these The Last Days? Must we Repent Because the End is Near? Or heed the warning that The Wages of (Fiscal) Sin is Death?

It may seem that way before we get through this calendar year, but we should be OK if we hold on and keep our nerve. We will need to do that because, regrettably, our nominal leaders will be running off the track on a regular basis, and predictions of disaster will be daily media fare.

Here is how I expect it to turn out.

Reducing debt and deficits: This became Topic A after Tea Partiers grabbed public attention and a piece of power last November. They did not do this in a vacuum. They did so because short-term deficits and long-term debt pose a great threat to our financial/economic stability; voters and taxpayers properly want action to reduce them.

The Tea Partiers' strength became particularly apparent last Thursday (April 14), when enough Republican House members voted against the short-term budget deal, negotiated between Speaker John Boehner and President Obama, that Boehner was forced to round up House Democratic votes to gain the bill's passage. Rep. Steny Hoyer, the No. 2 House Democrat, voted for the package himself and helped Boehner get the additional votes he needed. (Hoyer increasingly is displacing the House Minority Leader, Rep. Nancy Pelosi, as the go-to Democrat in that body).

Tea Partiers were particularly inflamed because, the night before, Obama's presentation of his long-term deficit-reduction proposal — to counter that put forward earlier by Rep. Paul Ryan — had been surprisingly sharp-edged and partisan. They saw it more as an Obama campaign-kickoff speech than a sober presentation of an agenda. (Boehner, Ryan, and other mainstream GOP leaders were put off as well; Obama had invited them to his presentation and, then, blasted them publicly in it rather than offering olive branches).

On the other side of the political spectrum, many liberal groups are angry regarding spending and program cuts proposed by Obama. The AFL-CIO Executive Council, which includes presidents of most major unions, reportedly vented against Obama in its Thursday meeting, objecting in particular to spending cuts and to Obama's embrace, after long delay, of a trade deal with Colombia. Liberals also are restive about continuing U.S. commitments in Iraq and Afghanistan and, now, the new one in Libya.

The turbulence associated wtih the last-minute budget deal will seem modest compared to that which will take place within the next 30 days, as the $14-trillion-plus national debt will hit a place where Congress must act to lift the debt limit. Both Democrats and Republicans in the past have voted at various times against lifting the limit. Obama himself did it as a senator. But, this time, there will be no fooling around. Boehner and Senate Minority Leader Mitch McConnell both would like to lift the limit with a minimum of tumult, keeping the action separate from ongoing deficit-reduction debate. But enough of their GOP flock are demanding fresh deficit reduction — on a larger scale than the $38.5 billion in the recent budget deal — that Boehner and McConnell will have to get such concessions as part of the debt-limit lifting or risk mutiny among their troops.

A so-called "government shutdown," threatened before the recent budget deal, would have been brief and without real effect on the U.S. economy or longer-term provision of government services. A failure to lift the debt limit, however, would have international financial repercussions and raise questions of default.

So, the debt limit will be lifted — but only after confrontations far nastier than preceded the recent budget deal.

Then debate will move to the next fiscal year's budget and the competing Ryan and Obama plans for longer-term deficit reduction.

Dueling plans and visions: The two plans both would reduce federal deficits but make only modest dents in long-term debt — depending on the state of the economy over the next decade. As you might expect, the Ryan Plan stresses spending cuts, the Obama plan tax increases (mainly focused on upper-income taxpayers).

Both plans would address Medicare and Medicaid costs. The Ryan Plan would turn Medicaid, which serves the poor, into a block grant program; money would be sent to the states to be spent as each state decided. Ryan would give Medicare seniors a credit to buy private health insurance; Obama would give new powers to a federal commission which would reduce unnecessary Medicare spending while using federal purchasing power to cut prescription-drug costs. Both punt to a degree on Social Security reform. The Ryan Plan would preserve all the Bush tax cuts extended last December. The Obama Plan would end them for upper-income taxpayers.

Both plans constitute opening offers. Neither Obama nor a Democratic Senate will accept the Ryan notions on Medicaid and Medicare. The Medicaid changes almost surely would result in a net loss of assistance for the needy. In some Southern and Mountain states, the cuts would be drastic. Medicare privatization, in any form, remains a bad idea.

By the same token, Obama's formulas for Medicaid and Medicare reform offer little real prospect of cost saving. The Medicare prescription-drug benefit already has proved far less costly than originally estimated. With both these programs, as eventually with Social Security, it will be necessary to change eligibility rules and benefit levels which have expanded steadily since they were enacted in 1965. Republicans will have to concede some new taxes. Obama will need to spare small-business owners who constitute a large share of the "millionaires and billionaires" whose taxes he pledged to raise last week.

If you look at the various categories of taxing and spending, within both plans, you can see where common ground can be found.

I continue to regret that Obama missed a golden opportunity to address these issues — and to avert the necessity of dueling Ryan and Obama Plans — when he did not specify that a simple majority of his 2010 deficit-reduction commission (the Simpson-Bowles Commission) could approve the commission's recommendations, which then could be passed or rejected by one up-or-down Congressional vote on the whole package.

Had he done that, the Congressional vote could already have put these contentious issues to rest and enacted a balanced bipartisan package of deficit-reduction reforms. Instead, Obama specified that a weighted commission majority, rather than a simple majority, would be necessary to endorse the package of proposals. (When several commission members proposed to Obama that they lobby their peers to reach a weighted majority, he told them not to do so.)
Thus Obama, the Congress, and the American people face what will be a year-by-year ordeal to get federal taxes, spending, and debt service into alignment.

Campaigning for 2012: The climate aleady has been made difficult by the begininng of the 2012 Presidential and Congressional campaigns. Since the 2010 electoral returns, no Democratic or Republican candidate for any major office can afford to be identified with expanding deficits or debt. But, to keep their core constituencies in line, Democrats will demonize the rich and characterize Republicans as heartless toward seniors and the poor. Republicans will paint Democrats as reckless spending addicts more interested in expanding government and pursuing social issues than paying attention to ordinary Americans' daily economic concerns.

Obama, as president, has a policy framework on which he must seek a second term. Moderate Republicans, such as former Massachusetts Gov. Mitt Romney or former Minnesota Gov. Tim Pawlenty, would as presidential candidates operate in a slightly-right-of-middle context to counter the slightly-left-of-middle persona which Obama will assume next year.

Yet, at this point, eccentric populist/conservative Donald Trump is getting more media attention than any public figure except the president. Trump, a lifelong attention-seeker and TV personality, barely makes sense in his frequent television interviews. On many issues, he is a less meandering Glenn Beck. He makes even former Alaska Gov. Sarah Palin and former Arkansas Gov. Mike Huckabee seem restrained and knowledgeable. Palin and Huckabee, who are paid Fox TV commentators getting constant prime-time exposure, also are rabble rousers in their own right, although Huckabee projects publicly as down-to-earth and sensible. It is absurd that Trump, Palin, and Huckabee are being so featured because they attract a certain demographic viewing audience.

If you are a Democrat, you might see good news in Trump's constant public exposure. But think again. The overall political context shifts when such people gain an audience. In 1992, you may recall, Ross Perot gained great notoriety — and important short-term popularity — when he emerged at a time when debt and deficits also were a salient issue. Early polling that year showed Perot running ahead of both President Bush and Arkansas Gov. Bill Clinton, the two major-party nominees, in the presidential race. In time Perot made a fool of himself, 10 times over, and fell in the polls. Yet, on Election Day, he nonetheless got 19 percent of the total popular vote — a scary number.

Meantime, offshore: Domestic budget debate has in recent days obscured the ongoing conflict in Libya. There, the U.S., France, and United Kingdom have agreed on a Qaddafi Must Go policy. American planes are again actively taking part in bombing missions against Libyan forces — despite the declaration by Defense Secretary Bob Gates two weeks ago that such U.S. missions had ended and would-be taken over by NATO partners. CIA trainers are on the ground with rebel forces. So are U.S. special-operations teams. We also apparently are providing arms to the rebels and, at the same time, trying to sort out promising leaders among them.

Yet, as of today, they do not appear close to seizing the capital or displacing Qaddafi. More than $1 billion already has been spent by the U.S. on the intervention. A long, drawn-out conflict will not be tolerated either here or in Europe, where some NATO countries have opposed the intervention from the beginning.

We are scheduled to depart Iraq later this year. Gates recently visited Baghdad to see if a continuing presence would be necessary — or sought by the Iraqi government — after that time. As it turns out, just about all Iraqi factions are calling for our departure. Our continued presence would be unpopular. We shall see what happens in 2012, once Americans are gone, and how the balance of power may shift among moderate and radical Shiites, Sunnis, Kurds, and Al Qaida types. Iranian-associated Shiites have increased their numbers in Iraq in recent months and reportedly are organizing for the post-U.S. period.  
U.S.-Pakistani and U.S.-Afghan relations are increasingly tense. Pakistan has demanded a reduction in CIA personnel in the country and in the number of drone strikes in tribal areas on the Afghan border. The U.S., for its part, sees Pakistani intelligence services as protecting and even nurturing Taliban and Islamic fundamentalist groups on Pak territory. Afghan President Karzai, partly for domestic consumption, has challenged the U.S. frontally over the issue of Afghan civilian casualites, in the fight against the Taliban, and on other matters. In both Pakistan and Afghanistan, indigenous leaders clearly are looking beyond our anticipated departures and making longer-term arrangements with fundamentalist forces in their countries.

It is entirely possible that, next year, the question will be asked: Why did we spend all those lives and all that money in these places when, in the end, things are much as they were before? Good question. With all our domestic difficulties, I am more optimistic about their solution than I am about happy endings where American forces presently are engaged.


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About the Authors & Contributors

Ted Van Dyk

Ted Van Dyk

Ted Van Dyk has been active in national policy and politics since 1961, serving in the White House and State Department and as policy director of several Democratic presidential campaigns. He is author of Heroes, Hacks and Fools and numerous essays in national publications. You can reach him in care of