08.02.11

Debt Deal’s Winners & Losers

How lopsided was it? Now that Congress has signed off on the bill, Daniel Stone looks at the political fallout—from Obama’s reelection prospects to the Tea Party’s power in the House.

The debt deal approved by Congress and about to be signed into law by President Obama on Tuesday took months of partisan wrangling, and not everyone came out ahead. From the Tea Party to the long-forgotten Bowles and Simpson, The Daily Beast ranks the winners and losers.

WINNERS

Fiscal Conservatives and the Tea Party
There are about 90 highly conservative members of the House Republican caucus aligned with the Tea Party. And among them, about 30 members swept to office in 2010. Never before has such a small group driven such a large debate. Their size turned out to be a key asset: Speaker John Boehner simply couldn’t amass a majority without them. But courted with legislative goodies like committee assignments or bill assistance, these members held their ground to fundamentally reshape the debate to shrinking government without new taxes. Newly empowered, expect them to go after more, including the Environmental Protection Agency, the Department of Education, and even President Obama’s judicial nominees.

House Speaker John Boehner
Yes, there was that embarrassing episode on Friday evening when Boehner thought he had the votes to pass his plan, then very publicly realized he didn’t. But that was then. By the time the final votes were cast, Boehner had kept a majority of his caucus together and negotiated with the president—even, as he disclosed in his floor speech, putting revenues on the table. Did he stick his neck out a mile, as he said? Probably an exaggeration. But he certainly performed the ultimate high-wire act with no net, securing him another lease on his speakership. And his party can boast it kept taxes from being raised in the first phase of this deal.

President Obama
If you count up the cuts to federal programs that Obama had to agree to in order to raise the debt ceiling, the president got a raw deal. But despite the law’s pain, there are also significant benefits for the president. He’s the first president to sign a serious debt-reduction law in more than 20 years. He reined in federal spending by as much as $2.5 trillion and set limits for how much the nation can rack up in debt. He also avoided a default that could have spelled economic doom as he headed into his reelection campaign.  Expect to hear Obama make that case while he travels around the country later this month.

Grover Norquist
If not for the president of the conservative group Americans for Tax Reform, Republicans may have actually signed onto revenue increases as part of a deal. But Norquist and his group’s “No Net Tax Hikes” pledge set the rules of the debate. And despite Obama’s repeated pleas to Republicans and the American people for increased revenues, Norquist prevailed.

Vice President Joe Biden and Senate Minority Leader Mitch McConnell
Two old friends from their Senate years and well versed in the nuances of legislative give and take, Biden and McConnell often were overshadowed by flashier players in public. But behind the scenes, they showed how last-minute deals are put together and how lawmakers lined up to support it.

Gabrielle Giffords
At a moment when the nation most needed an injection of bipartisan good will, Giffords strolled into the House by surprise and cast her first vote since being shot in the head by a would-be assassin in January. And her vote in favor of the debt deal showed that some issues rise above politics.

LOSERS

The Pentagon
What did military officials do to deserve this deal? The answer: be really important to conservatives. With congressional Republicans refusing any tax increases of any kind, the bargaining chip for Democrats became defense spending, a longtime conservative sacred cow. Under the deal, the Department of Defense immediately endures $350 billion in spending reductions over the next decade. And if the special commission—dubbed the “Super Congress”—doesn’t find another round of cuts, the Pentagon loses $600 billion more. It’s true that the Pentagon could use a good belt-tightening, as former defense secretary Robert Gates once advocated. But expect the Pentagon to look for some relief as it crafts a new strategy for fighting wars and insurgencies.

Congress
Already held in perennially low regard, Congress looked more inept and less in tune with Americans than ever before. The impact was evident in a CNN poll released Tuesday, which showed that three out of four Americans believe their elected leaders acted like "spoiled children." Making it worse is that one tool lawmakers have used in the past to repair their image with voters—bringing home the bacon with federal projects to local districts—has been greatly weakened by the spending slashes.

President Obama
It’s a fact in Washington that spin always emerges from the White House, no matter who is in charge. But despite the administration’s claim of a great bipartisan deal for America, the president got schooled. He blinked several times in the debate, giving up the possibility of a clean debt-limit increase, and then taking tax increases off the table that his own party wanted. And then he allowed social programs like Medicare and Medicaid to face cuts in round two of the debt deal. Obama may win the war when the Bush tax cuts expire next year, or if the super-congressional commission decides revenue increases should be part of a longer-term strategy. But for now, he lost this battle by the standards of politics. The entire episode took Obama off his job-creation message, and the cuts codified in the law will tie his hands from spending much more money to try to revive a still-lagging economy.

Alan Simpson and Erskine Bowles
The chairmen of Obama’s special debt commission were ignored when they made their recommendations. Their plan would have led to more debt reduction, but now their work looks like a waste of the paper it was printed on.

Greece
For a while, it looked like the land of Homer might be the planet’s second-most financially irresponsible country, certainly as the U.S. faced the very real threat of its credit rating being downgraded. But when legislators eked out a deal to meaningfully cut spending and rein in debt, America suddenly looked on the path toward fiscal balance. Keeping, of course, its valuable AAA rating potentially protected.