Debt ceiling follies ... the grand finale

There is total chaos in the interwebs about the deal today.

Here are Matt and Nick from the other day. I think their remarks are pretty much still on target.

Here is maybe the worst David Warsh column ever, in which he compares the tea party with Senator Joseph McCarthy. The tea party is just the messenger, and the message is that our institutions are failing at dealing with the principal-agent problem between the public and the state. That failure is bipartisan, both Bush II and Obama (and their associated congress-critters) have been spending like 12-steppers going off the wagon. It is ongoing abject failure to behave responsibly by politicians, combined with poorly designed institutions that allow them to do so, that result in things like the tea party, state balanced budget requirements, Proposition 13 in California and so on. Denouncing those responses just demonstrates lack of understanding of the underlying problem.

Also, was I the only one who was quite confident that the debt ceiling would be lifted? Things that can't happen, don't. This is one of them. Note that this is a variant of Herb Stein's dictum that things that can't go on forever, won't.

The WSJ declares the (apparent) deal a great victory for the tea party while Ezra Klein goes into additional detail. My own take is that it is a win for, essentially, no one. The current cuts appear to be largely reductions relative to scheduled increases, not actual cuts. Among the actual cuts are extended UI benefits, which is not where I would have looked first given the current unemployment rate.

Moreover, there are no definite future cuts of the sort that are difficult to reverse, and thus more likely to actually happen, like raising the age of Medicare eligibility, or getting rid of the first dollar side of the Medicare Part D "donut hole", or reducing social security indexing to reflect the upward bias in the CPI, or zeroing out agricultural price supports or the export-import bank or the Drug Enforcement Agency or HUD or removing all but a token number of US troops from South Korea, which has long since attained the economic wherewithal to take care of its own defensive needs.

More importantly, the broad thrust of the deal is to kick the fiscal responsibility can forward for another 18 months, until after what promises to be a truly nauseating election year. That does nothing to reduce the medium-term uncertainty about tax rates and (many) other policies that is partly responsible for holding back growth.

I give Obama and Congress a "D" for "dud".