According to most, this deal is bad. Here are two different accounts of how bad it is. Here is Jon Chait:
The debt ceiling agreement is a horrible piece of legislation. It ratchets down already too-low domestic discretionary spending caps and imposes painful sacrifice on the middle class with little asked of the rich. Obviously, though, you can’t assess any deal without asking “compared to what?” Did President Obama get a worse deal than he had to, given the circumstances? And the answer to that question, in turn, depends on when you start the clock, and more importantly, when you stop it. Let me explain.
He runs through the three mistakes Obama made leading up to the current negotiations. That leads him to conclude that this is a good deal given the circumstances:
Once it had agreed to negotiate a ransom payment, the administration was left with a series of bad options. I think the current deal on offer is about as non-bad as it could have gotten. It managed to backload the timing of spending cuts to minimize damage to the recovery and protect programs for the most vulnerable beneficiaries (which also happen to be the most vulnerable programs.) I’ve argued that Obama should give up on trying to get Republicans to accept higher revenue and just sign an all-cuts agreement.
Backloading cuts is a silver lining of the deal. Better to cut spending later than now while the economy still needs demand and people still need help. Chait goes on to argue that the lack of revenue increases isn't a big deal because Obama has the leverage on the expiration of the Bush tax cuts. He wasn't going to get revenue in this deal. So all in all this was about the best deal he could get. Kevin Drum disagrees. First what the deal entails:
Roughly speaking, it's built around $1 trillion in cuts now and $1.5 trillion in cuts later. The "later" cuts will be negotiated by a super duper congressional committee, and there's a sword of Damocles hanging over their heads to ensure they don't deadlock and end up punting on a deal. It's not yet 100 percent clear what that sword is, but apparently if they don't come to an agreement, or if they do but Congress fails to pass their deal, automatic cuts will take place in the discretionary budget, split 50-50 between domestic cuts and defense cuts. Supposedly, the fact that the automatic cuts affect both domestic and defense spending will be so horrifying to conservatives and liberals alike that they'll support the Super-Duper Congressional Committee's deal. Color me skeptical.
He goes on to point out that liberals will not want to back a committee deal that cuts domestic spending more than defense. And Republicans will not agree to any tax increases. And a deal that cuts defense more than domestic spending is very unlikely. I agree with all of that, which means that its likely that Obama and Dems will be left with the options of either accepting a deal that cuts domestic spending more than defense or decline the committee's plan and accept the trigger. Given their propensity to cave, my money is on them accepting more domestic cuts, which would be the worst case scenario for people, the economy, and liberals. More from Drum on why that is the worst case scenario:
It's a shit sandwich no matter how you look at it. And it's a shit sandwich in at least two very specific ways: (1) It means we'll continue to live in a fantasyland that says we don't need any tax increases even though our population is aging and we're plainly going to need higher revenues to support this demographic reality; and (2) we'll continue to live in a fantasyland that says our problems are primarily caused by discretionary spending. This is, of course, exactly the opposite of reality, which means we're going to screw the poor and do nothing serious about the long-term deficit. Nice work, adults.
Then he addresses Chait on the Bush tax cuts:
There are a few liberal pundits out there who believe that a cuts-only deal like this one isn't all that bad. Jon Chait is one of the leading proponents of this theory, and it goes like this: Maybe an all-cuts deal is bad, but by leaving taxes off the table completely it opens the door to letting all the Bush tax cuts expire at the end of next year. Basically, Obama just needs to keep insisting that he'll only sign a bill that extends the middle-class tax cuts1 but allows the tax cuts for the rich to expire. Republicans will flatly refuse to send him such a bill, and as a result all the tax cuts will expire without Obama having to break any promises.
Drum thinks Republicans will cave and the middle class cuts will be permanently extended while the rich cuts will expire. That's the ideal scenario. But Republicans will at the very least fight hard for the rich cuts. And their leverage will be that if Obama doesn't sign off on all of them he will take the blame for raising taxes on everyone. Its the same logic they used with the debt ceiling. If Obama didn't agree to a deal, he would take the blame for the problems that resulted from it not being raised. Do you really think Obama will stick to his guns and risk raising everyone's taxes?
At this point, I don't have faith that he will take that risk. He is too scared of pissing off a few independent voters, the people who, as Chait points out, were probably the motivation behind his stance on the debt ceiling deal. But what Obama is risking is pissing off enough liberals who could sit out in 2012 and produce the same results of 2010. And if that happens we will without a doubt have an extension of the Bush tax cuts, along with who knows what else.