Since the news has been dominated by the debt ceiling issue for the past week, there has been relatively little on the Republican presidential field. That's especially true of also-rans like Rick Santorum. But over the past 24 hours a compromise was reached in the Senate. That Bill passed the House earlier this evening, and is pretty likely to pass the Senate tomorrow.
From the view of a liberal, the end result of the bill is pretty crappy. It's all spending cuts, no revenues, and it could result in cuts to Medicare, Medicaid and Social Security in the next round of cuts. However, it's better than a default, which might have made the 2008 downturn seem like a mere correction. Also, while the political part of me likes the idea of the President invoking the 14th Amendment option, which would involve President Obama stating that the debt limit in itself is unconstitutional, the lawyer in me thinks it's generally a good idea to avoid a Constitutional crisis if possible. It wouldn't help anything if the full faith and credit of the federal government turned on issues of standing and Constitutional interpretation.
So we're in a familiar zone: we have an incredibly flawed bill, but one that avoids the worst possible outcomes. But what are the possible long term results? That likely depends on two things: (1) does the unemployment rate go down? And (2) if not, who do the American people blame for it?
Result No. 1: Best Possible Option
I have heard rumors from some friends who work in the financial markets that some big companies are saying they've been waiting to hire until the debt ceiling issue was determined. One the one hand, this does make some sense. Corporate profits have been up, so you do have a lot of large companies sitting on some significant piles of cash. Considering the uncertainty with the value of bonds pre-debt ceiling increase, it would be understandable if many companies didn't want to add debt. Adding employees is adding debt. On the other hand, though, it sounds a lot like what Paul Krugman has called the Confidence Fairy.
So the best case scenario is that employment picks up, we're down to something like 7% or below unemployment by 2012, and Obama and the Democrats ride that to significant gains in 2012, at which point they enact some more liberal policies than have dominated the past 10 months or so.
Result No. 2: Not Great Now, But OK Long Term
Most analysts, though, don't expect a significant uptick in employment. So what's the next best option? That things don't get significantly better, but the American populace blames Republicans and the Tea Party for it. So while we won't see improvement now, we should see an Obama re-election and some gains in Congress. At that point hopefully the government can get along dealing with our real big three long term economic issues: (1) unemployment; (2) not enough revenue; and (3) bending the medical cost curve throughout society.
Result No. 3: A Whole Lot of Bad
In this case, the economy both wouldn't improve and Obama would be blamed for it. Republicans would maintain the House and take the Senate, and a Republican would win the White House. They'll deal with the economy the way they always do: cutting taxes. Our inherent problems in our economy won't get any better, income disparity will increase, and they'll undo what progress Democrats have been able to make over the past few years. In other words, it's the nightmare scenario.
Personally, I'm betting on number 2, and counting on the American people to have long enough memories to remember who caused all the problems with this debt bill. We'll see how that goes.