Rachel Maddow summed up pretty nicely why we saw the reaction we got from Wall Street to the debt ceiling deal that John Boehner was so pleased with "getting 98%" of what he wanted in finally being passed this week:
MADDOW: After the debt ceiling deal got signed, that's what happened on Wall Street -- about twenty little green boxes in a sea of about four hundred and eighty red ones. Everybody's been talking about how the markets would tank if we didn't reach a debt ceiling deal. Today we got a debt ceiling deal, and the markets still tanked. And the markets tanked because this debt ceiling deal, just passed today in the Senate and was signed into law by a lonely President Obama, signing the law with nobody standing behind him -- this debt ceiling deal is essentially telling an economy that has just been run over by a car that now it needs to lay down in the road again, so we can back up over it and run it over a second time.
As Rachel noted here, the Economic Policy Institute reported that all in all, this deal could end up costing Americans 1.8 million jobs -- What’s missing from the debt ceiling debate? Jobs:
The unemployment rate, currently above 9 percent, is projected to remain high for a long time. For example, the current Blue Chip Economic Indicators consensus forecast puts the average unemployment rate for 2012 at 8.3 percent. The agreement to raise the debt ceiling just announced by policymakers in Washington not only erodes funding for public investments and safety-net spending, but also misses an important opportunity to address the lack of jobs. The spending cuts in 2012 and the failure to continue two key supports to the economy (the payroll tax holiday and emergency unemployment benefits for the long term unemployed) could lead to roughly 1.8 million fewer jobs in 2012, relative to current budget policy.
The agreement would reduce spending by at least $1 trillion over 10 years through budget caps on non-mandatory programs, with additional reductions under discussion in a second phase. While the bulk of the cuts are back-loaded – coming more in the future – the near-term cuts would still have an immediate impact. Applying conventional multipliers, the reduction of $30.5 billion in calendar year 2012 would reduce GDP by 0.3%, and result in roughly 323,000 fewer jobs (as depicted in the table below).
In addition to the immediate cuts to spending, the debt ceiling agreement fails to continue two major policies which had been part of broad agreements in the past. The payroll tax holiday and extended unemployment insurance were passed last December along with the two-year extension of the Bush-era tax cuts; but are set to expire at the end of 2011. While Congress could still extend these policies between now and the end of the year, that scenario is looking much less likely today. (Any economic support subsequent to this deal would have to be offset by other tax increases or spending cuts in 2012 or a further increase in the debt ceiling, neither of which seems politically viable.)
And as Sec. Tim Geithner noted, even though our politicians finally raised the debt ceiling and averted a default on our debt, he is not sure if the United States still might be downgraded -- Geithner unsure if U.S. debt to be downgraded: report.
And as the LA Times reported -- Moody's and Fitch keep U.S. triple-A credit rating, but say outlook is negative.
Rachel wrapped up her segment talking about how the administration has said they want to shift their focus to jobs now, apparently counting on some type of good will or cooperation from Republicans in doing so, but as she pointed out, we've seen absolutely no evidence that there's any reason to believe that will happen.
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