Does Debt Bill Actually Fix The Struggling Economy? Lifting the debt ceiling and cutting more than $2 trillion in public spending is likely to have only a minor impact on the economy over the next two years, as almost all the cuts would be made in 2014 or beyond. Renee Montagne talks with David Wessel, economics editor for The Wall Street Journal and a frequent contributor to Morning Edition, about the impact to the economy.
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Does Debt Bill Actually Fix The Struggling Economy?

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Does Debt Bill Actually Fix The Struggling Economy?

Does Debt Bill Actually Fix The Struggling Economy?

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STEVE INSKEEP, Host:

It's MORNING EDITION from NPR News. I'm Steve Inskeep.

RENEE MONTAGNE, Host:

Good morning.

DAVID WESSEL: Good morning, Renee.

MONTAGNE: So, David, let's start with the deficit. How far does this go towards fixing the problem?

WESSEL: But even if that committee proves successful, it won't be enough to put the federal budget on a sustainable course. And this whole package is much less than either Paul Ryan, the House Budget Committee chairman, or President Obama proposed in the spring or the Bowles-Simpson deficit reduction commission recommended. So it's something, but it doesn't take us to sustainability.

MONTAGNE: Well, let's talk about that committee of Congress - that bipartisan sort of super committee is what they're calling it. You know, one reason it could be different from all the other blue-ribbon commissions that have pondered the deficit is that it has got and Congress has got a gun to its head because of automatic cuts that would kick in if the committee can't agree.

WESSEL: But it's really too soon to tell whether the committee will work and whether it will find the kind of compromise that President Obama and Speaker Boehner were talking about or whether it'll cobble together a whole bunch of little things in order to get to this $1.5 trillion target.

MONTAGNE: Well, there's one big thing that has caused a lot of contention, and that are - there's multiple - Bush-era tax cuts. Why have they proved so off limits?

WESSEL: Well, they're not off limits. The agreement is basically silent on that, because the president and the Republicans couldn't agree on what they want to do. The Republicans insist they'll keep the tax cuts or do some tax reform that does the same thing. And the president, who signed an extension of the tax cuts - both for middle income and upper income taxpayers - last December, now says he won't sign another extension of the upper income tax cuts. So this debate just wasn't resolved yet. And we'll have to see what happens.

MONTAGNE: Well, OK. Another big issue, of course, is the recovery. As Congress and the president have been haggling, the economy has not been looking very good. What will this deal do to that?

WESSEL: So basically it removes a big weight. It does nothing to help growth.

MONTAGNE: And nothing here aimed at helping the unemployed or getting employers to hire or in other ways helping to get the economy growing faster?

WESSEL: No. Well, some Republicans argue that reducing the deficit and shrinking government spending will make room for the private sector to do better. The White House is telling us that it still hopes to extend the temporary tax cut on payroll taxes for another year beyond its expiration date. But it couldn't get those included in the deal, so it's hoping to somehow get those passed later in the year.

MONTAGNE: David, thanks very much.

WESSEL: You're welcome.

MONTAGNE: David Wessel is economics editor of The Wall Street Journal.

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