Obama desperately needs to relaunch his economic message. But since the 2010 elections, he has not controlled the terms of the economic debate. During the debt-limit controversy, he often appeared petty and vindictive. He was largely cut out of final negotiations by his own party. Obama's policy agenda seems exhausted. If he cannot change this dynamic, his re-election is unlikely.
Second, House Speaker John Boehner has been weakened by fractures in the Republican coalition. About 10 percent of the House GOP caucus decided to humiliate their own speaker -- and undermine Republican negotiations in the Senate -- in order to force a symbolic, meaningless vote on a balanced-budget amendment. This is not an indication that Boehner has poor leadership skills; to the contrary, his political instincts during this debate were generally impressive. But it is a demonstration that a significant minority of House conservatives has no interest in actually governing. The dissenters made no serious strategic case for their actions. They apparently view public office as a chance to periodically display their purity. It is the political philosophy of the peacock.
Third, the groundwork has not been laid for a serious debt debate, even after the presidential election. An honest Medicare discussion was completely deferred -- which I suspect most Republicans, even tea party Republicans, found a relief. They seemed pleased to move beyond the Medicare controversy provoked by Rep. Paul Ryan's budget -- back to the more comfortable ground of cutting discretionary spending.
The problem is that an honest debate on controlling Medicare costs -- a prerequisite for meaningful debt reduction -- is uncomfortable for both parties. Democrats support price controls in an ever more repressive system that tends toward rationing. Republicans want to limit costs by increasing out-of-pocket costs for the middle class. Neither side has a political interest in preparing Americans for unavoidable pain. This challenge is at least an order of magnitude larger than anything Congress currently contemplates.
So a debt deal is struck. But, after this spectacle, why would a credit rating agency, a foreign investor, or an American voter have confidence in the ability of the American political system to confront the coming entitlement emergency?