The Debt Deal's Biggest Losers

In my new column for The Week I discuss who has lost the most in the new debt deal:

The first and most obvious loser: National security.

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

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.

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.

Click here to read the full column.