The debt deal's biggest losers

Here at TheWeek.com, Ed Morrissey challenged Tea Party Republicans to recognize that they won the debt-ceiling standoff. He's right, too. But if some win, others must lose. Can we identify the losers? I see three.

The first and most obvious loser: National security.

The economist Herb Stein used to advocate a simple model of federal budgeting:

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a) Decide how much it costs to defend the country.

b) Pay for it.

c) Then see what else you can afford.

Adam Smith phrased the same idea more elegantly by saying that "defense is superior to opulence." The point is that the defense of the nation is not just another line item. It's the first obligation of government, more important than any other form of spending, and way more important than minimizing taxes.

For today's Republican Party, the defense of the nation is at best a secondary priority.

Yet this budget deal treats defense as just another special interest. Worst is the enforcement mechanism for the deal: If spending targets are not met, the deal subjects Medicare and Medicaid to automatic cuts (presumably to punish Democrats) and subjects defense to cuts (presumably to punish Republicans). The enforcement mechanism could have included new taxes, but defense was substituted to clinch the deal. That way Republicans get to tell their Tea Party base that the deal contains no tax increases. But the substitution also reveals that for today's Republican Party, the defense of the nation is at best a secondary priority.

The next loser: American political stability and financial credit.

The debt-ceiling debate feels like one of those tragic episodes out of the history of the fall of republics. To gain their point on a budget matter, Republicans did something unprecedented in the annals of American government. They made a bargaining chip out of the public credit of the United States. In a well-functioning democracy, certain threats are just not used, and the threat to force the country into default should rank high on the list of unacceptable threats.

Yet congressional Republicans not only issued the threat, they did so successfully. They have changed the rules of the game in ways that will have ramifications for a long time. Maybe Democrats will copy them. Or maybe Republicans will do it again. Either way, something that was once unthinkable has become thinkable. Any holder of U.S. government bonds has to feel a little less confident of the security of his or her investment after this summer's debt-ceiling episode.

A third group of losers: The poor, the unemployed, the sick, and people who rely in any way on air, rail, or road transport.

The debt deal concentrates America's budget-cutting attention on the discretionary budget, which pays for things like food stamps and highway programs. The main body of the deal does not address the areas of the budget where costs most call for cutting: Health-care programs.

The fundamental driver of America's domestic budget is the unjustifiable expensiveness of American medicine. Americans pay 17 percent of GDP for health care, half of that money out of public funds for Medicare, Medicaid, veterans health, and the like. The next most open-handed advanced democracy, Switzerland, pays 13 percent. If Americans spent the same percentage of GDP on health care as the Swiss, the leftover cash would be the equivalent of getting the entire defense budget for free.

The main body of the debt deal postpones the Medicare and Medicaid problem for later. (In the summer of 2009, Republicans went on record to denounce attempts to rationalize Medicare coverage as "death panels.") The area most exempt from budget-cutting is the area where the waste is worst. The area where the budget cuts are to be concentrated is the area where the need is greatest.

You'll notice that I don't mention President Obama as one of the losers. That's because I don't think he is one, not in the political sense. Yes, he was utterly outmaneuvered. Yes, he was exposed as less firm and less ruthless than his political opponents. Those of us who doubt that Barack Obama is up to the job of president received one more disturbing proof. But politically? Politically, Republicans handed Obama exactly what he needs most: Something else to talk about in 2012 other than the awful state of the economy.

Without the debt-ceiling crisis, the 2012 election would have been dominated by a single haunting question: Where are the jobs? Now the election will be a contest between two competing narratives: "Obama wrecked the recovery" and "Republicans want to destroy the social safety net in a time of recession." Thanks not only to the Tea Party but to the strenuous efforts of more mainstream Republicans, like Budget Committee chairman Paul Ryan, the second narrative, Obama's narrative, looks at least as convincing as the first. It's the thing the president needed most. Now he's got it.