AT LEAST the last-minute budget deal negotiated in Washington means the US has avoided defaulting on its government payments as the spending ceiling was increased. And President Barack Obama will not have to revisit the exact same political drama played out in recent weeks between Democrats and Republicans, the executive and the legislature, in next year’s presidential elections. But to get this compromise he has sacrificed his previous insistence that wealthy individuals and corporations be taxed more and accepted prolonged public spending cuts. This will depress the economy precisely when it needs stimulus.
No wonder the deal leaves so many dissatisfied. It is merely a temporary ceasefire in a long war between cuts and spending, exemplified in the agreement to balance the debt ceiling increase against cuts to be proposed by a joint congressional committee by November, which is in turn disciplined by mandatory and even more unpalatable cuts if they fail to agree. This may be procedurally skilful, but it will ensure the issues continue to dominate the political agenda. Voting in the House of Representatives found many Democrats abstaining or voting against in protest, just as the Tea Party faction of the Republicans also expressed their unhappiness. Their dogmatic opposition to any tax increases stands out as the major victor in this confrontation.
It will now be difficult indeed for Mr Obama to retrieve his political position and initiative. His role has been relatively passive during the gruelling negotiations – too much so say his Democratic critics. He left much of the detailed bargaining to his vice-president Joe Biden, appeared for a long time to misjudge the Republican willingness or ability to compromise and was therefore outmanoeuvred into conceding too much of his basic symbolic and political platform. This matters hugely for his reputation with Democratic party activists and supporters.
That will remain the case even if the Republicans still struggle to find a credible candidate to oppose him next year. Their ranks have been profoundly polarised by the Tea Party movement, fanned by a highly partisan media. The resulting political dysfunctionality in Washington makes it more and more difficult for Mr Obama’s politics of pragmatic centrism to succeed.
There is a wider concern about the US economy emerging from this whole stand-off. Latest data confirm last week’s news of weak growth in the first half of this year, while jobless figures remain at about 10 per cent. The US badly needs a major programme of infrastructure spending, which could address employment effectively, but where can it be funded from in these political circumstances? Imposing elongated budget cuts on such a stuttering economy retards recovery and could provoke another recession. That plays into the debate on whether the US should be downgraded by the rating agencies. And that in turn opens up once again the international debate on US economic decline and whether it can afford its superpower role for decades to come. These look more and more like foundational events.