For all the partisan mudslinging in Washington over raising the U.S. debt limit, there was a fundamental consensus: America is on an unsustainable fiscal path and its long-term deficits have to be slashed.
Yet despite that bipartisan realization and the fact that the issue has consumed Congress for months, the emerging deal to raise the $14.3 trillion borrowing cap fails to address the root causes of America's real fiscal crisis.
The extraordinary chance America's leaders had to forge a "grand bargain" to rein in the country's exploding debt, with the threat of default a powerful incentive to succeed, has been squandered.
The moment has passed, and as America gets ready for next year's election season, some lawmakers and analysts wonder if there is the political will in Washington to ever confront the country's fiscal woes.
"I do believe we have missed a great moment of opportunity to reach a grand bargain, and I'm not sure whether the incentives will be aligned sufficiently to reach a grand bargain going forward," said Chris Van Hollen, the top Democrat on the House Budget Committee.
The emerging deal to raise the debt limit includes a two-step process to cut the debt by about $2.8 trillion over a decade.
"GRAND BARGAIN" NOW DISTANT MEMORY
The first $1 trillion in cuts have been largely agreed by lawmakers. A further $1.8 trillion in savings over a decade would be identified by a special committee appointed by Congress. Automatic measures, or "triggers", would implement the planned cuts if Congress failed to pass them.
The U.S. Treasury says that without a deal to increase America's borrowing capacity, it will begin to run out of money to pay its bills on Tuesday, and that a catastrophic default will follow.
The emerging deal, which if struck will avert the immediate crisis of default, is still a far cry from a much broader, $4 trillion deficit-reduction "grand bargain" President Barack Obama and John Boehner, the top Republican in Congress, appeared so close to clinching just over a week ago.
That agreement would have seen roughly $3 trillion in spending cuts -- including significant curbs on entitlement programs such as Medicare, the government-run health insurance program for the elderly -- and $1 trillion in revenue increases, mostly through reform of the tax code.
It would have been a serious, balanced effort in reducing America's long-term deficits because it would have tackled the biggest drivers of the debt -- the country's entitlement programs -- as well as find revenue increases to help cut the red ink.
But that deal was doomed when Eric Cantor, a House conservative and Boehner's deputy, told his boss it could never get through the chamber because of adamant opposition from the Republicans with the fiscally conservative Tea Party movement.
It was never envisaged that America's welfare system, particularly Medicare, Medicaid -- the health insurance program for the poor -- and Social Security, the state pension system, would explode the national debt.
But because of increased life expectancy, a growing population and a surge of baby boomers turning 65 and retiring, those three programs alone would devour 100 percent of all tax revenues by 2047, according to the non-partisan Government Accountability Office.
In 2000, at the beginning of George W. Bush's presidency, the national debt -- the amount the United States had borrowed over time -- was $5.7 trillion. Since then it has expanded due to two wars, Republican tax cuts, a deep and prolonged recession, a multi-billion dollar Wall Street bailout and Obama's hundreds of billions stimulus spending.
Now, the annual U.S. deficit in the current fiscal year is set to reach $1.4 trillion this year and is projected to remain in the trillion-dollar range for much of the next decade.
Though the deal now emerging will reduce entitlement spending, it does nothing to reform them. It remains to be seen if Democrats on the special committee will have the political courage to invoke meaningful cuts to such Democratic sacred cows as Medicare and Social Security, or if the committee's Republicans will agree to significant revenue increases.
"It looks as if the likely agreement will not touch entitlement spending or raise revenues -- two things that have to happen to deal with the long-term deficit," said Christina Romer, head of Obama's Council of Economic Advisers until September 2010.
"If the U.S. had passed a very bold, smart deficit-reduction plan, that would have been wonderful for the U.S. and the rest of the world."
The credit ratings agencies appear to agree. The proposed $3 trillion in savings appears insufficient to avoid a downgrade of the United States' coveted AAA rating by Standard & Poor's and Moodys.
The former agency repeated last week its belief that a $4 trillion deficit-reduction plan would be a "good downpayment" to show that Washington was putting the country's finances in order.
"It will not remove the threat of a downgrade," said Mohamed el-Erian, chief executive of PIMCO, the world's largest bond fund.
John Steele Gordon, a financial historian, was more optimistic. "I believe there is the political capacity" to deal with long-term deficits, he said. "There is a way to do it. We did after World War Two when the debt was 129 percent of GDP."
Alan Simpson, a former Republican senator and co-chair of Obama's deficit-reduction commission that came up with a $3.8 trillion plan last year, was typically blunt.
In addition to reforms of entitlement programs and defense spending, the commission's report also backed about $1 trillion in revenue increases through changes to the tax code.
But, he said, "If they leave out Medicare, Social Security, Medicaid and defense spending -- the four biggest drivers of the debt -- it won't fix a damn thing."
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