It’s the economic debate, not the U.S., that’s bankrupt

The government is open, but hope has lost its audacity.

After negotiations in which Republicans ended up gaining more cuts than they originally sought, President Obama chose to celebrate “the largest annual spending cut in history.” Lest we forget, these cuts total $78 billion from the president’s own budget, with programs for working and poor families taking the biggest hit. Any more triumphs like this and Obama will become a new American synonym for pyrrhic victory.

Katrina vanden Heuvel

Editor and publisher of the Nation magazine, vanden Heuvel writes a weekly column for The Post.

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 Collection of cartoons on Obama’s budget and the fight to get it right.

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Lost in the coverage of the juvenile, perils-of-Pauline, last-hour rescue from a government closure is the substance of the deal. The great con of the Boehner-Tea Party good-cop, bad-cop negotiating pose is that it focuses attention on intra-party melodramas. The real deal gets lost in the noise.

The cuts — “79 percent of what we wanted” in House Budget Chairman Paul Ryan’s words — will be exacted immediately, despite an economy still struggling to recover from the worst downturn since the Great Depression. A Congress packed with millionaires seems more attuned to the rising stock market and record corporate profits. But 25 million people are still in need of fulltime work; home values are sinking; gas and food prices are rising and wages are not.

The most sensible American economists warn against cutting back spending and laying off workers now. Even fiscal hawks like the co-chairs of the president’s deficit commission, Erskine Bowles and Alan Simpson, opposed cuts in spending in the current fiscal year. Similarly, Fed chairman Ben Bernanke, the conservative appointee of George W. Bush, warned against cutting spending or raising taxes in December, arguing that the economy still was struggling to get going.

That’s all forgotten now. “So be it” was Speaker Boehner’s infamous response when asked if the House budget assault would cost federal jobs. Goldman Sachs and Moody’s projected the original Republican plan would cost 700,000 jobs over the next year; now we’ll lose only three-fourths of that number. Some triumph.

The priorities in the deal also offend. Originally, all of the Republican cuts would have been taken from domestic programs, with deep reductions in education spending on everything from Head Start to Pell grants for lower-income college students. Obama succeeded in limiting the damage by spreading the cuts out more. The defense budget will rise by $5 billion (less than the $7 billion Republicans wanted). But the toughest cuts will come from the departments of Education, Labor, and Health and Human Services. Our costly infrastructure investment gap will rise. A $1 billion across-the-board cut in domestic spending sets the precedent for future — and senseless — across-the-board cuts.

Although the media seldom mention it, the cuts aren’t really a “down payment” on deficit reduction. They simply are a partial payment for the $700 billion, 10-year cost of the extension of the Bush top-end tax cuts that Republicans insisted on in December.

Now Washington plunges immediately into the battle over the fiscal year 2012 budget. Tea Party tribunes — led by Rep. Michele Bachmann — are vowing to block the pro forma vote on raising the debt ceiling unless there are structural changes to the budget. Having played chicken with shutting down the government, they are now raising the stakes by threatening to shut down the world economy.