US budget: If the sure sign of a fair agreement is a frown from both sides, then the US Congress is close to achieving an equitable one. Both Democrats and Republicans have major gripes about the deal to extend the debt ceiling that's been cooked up by their leaders and agreed to by President Barack Obama. Most important for markets, though, the agreement looks set to maintain momentum for further fiscal fixes.
But no matter how equitable or effective any agreement that increases federal borrowing authority may be, it must still pass the House and Senate. The former is still likely to be a tough draw. Congressional leaders have a major sales job ahead of them. Much attention has been given to the dogmatic and recalcitrant Tea Party Republicans in the lower chamber. House Speaker John Boehner will again have a tricky time wrangling that group to order. This agreement is far from what many conservatives desire.
For starters, the $1 trillion in projected spending cuts from the outlined deal don't come quickly enough. They also worry that the new congressional committee charged with finding another $1.5 trillion in debt reduction might recommend raising taxes, as many Democrats have argued for, or slashing defense spending.
But the tentative agreement may be as much at risk of being undermined by rank-and-file Democrats. Rep. Emanuel Cleaver, chairman of the Congressional Black Caucus, called it "a sugar-coated Satan sandwich." Raúl Grijalva, co-chairman of the Congressional Progressive Caucus, said the "deal trades people's livelihoods for the votes of a few unappeasable right-wing radicals."
Liberals don't like that the first round of debt cuts includes no tax increases. And they fret the second round will clip social insurance entitlements. Democrats also argue that, with the economy barely growing and unemployment rising, job creation should take precedence. But early hints that a budget deal might include a payroll tax cut or increased infrastructure spending have faded, as have GOP hopes for a corporate tax holiday.
But if half of Democrats and half of Republicans in the House vote for the deal, it passes. And America will have taken a small, but firm step toward repairing its fiscal health. It may not be sufficient to placate credit raters, but for investors concerned about Uncle Sam's creditworthiness it will be a step in the right direction.
