Partisan politics bring U.S. to brink of default [Report & Reckon]
Report & Reckon is a regular feature in which Phil takes a top story, breaks it down, and proceeds to opine on the subject. “Report, Reckon & Reply” is too much of a mouthful, but it’s expected that you add your two cents in the comments.
On Monday night, Barack Obama delivers this message: "I'm dealing with a bunch of f***in' children."
Over the past month, the debate in Washington over raising the federal debt ceiling has come to a treacherous impasse. President Obama, House Speaker John Boehner, and prominent members of Congress currently feature in a political drama that may end up with the American audience paying more than the price of admission.
Correct Me If I’m Wrong
Main source: “What exactly is the debt ceiling?“- Al-Jazeera
The debt limit is a concept put in place by Congress at the end of the Great Depression. It allows the United States Treasury to “issue debt” or essentially borrow money under a certain cap. Constitutionally, only Congress can authorize the Treasury to borrow money to fund operations. Since 1962, Congress has raised this debt ceiling 72 times. The current limit is at about $14.3 trillion.
Seeking policies of deficit-control and spending-curbs, one of the acts of the 2011 Republican-controlled House of Representatives was to repeal the rule that automatically increased the debt ceiling to reflect new budgets. Which brings us to the current situation. The current debt ceilings allows for payments up until next week’s deadline: August 2. Any agreement on raising the debt ceiling has to be agreed upon by the Republican-controlled House, the Democrat-controlled Senate, and the President, who has ultimate veto power.
If the debt ceiling is not raised, the government would technically default on some of its payments. It would have to pick which of its creditors do not get paid. For the first time in history, the U.S. would fall behind on its payments.
The disagreement supposedly stems from perspectives on the responsibility of government. Though Democrats have historically supported entitlement programs such as Social Security, Medicare and Medicaid, these programs are on the table for cuts, along with other government programs. Some would rather see a focus on increasing tax revenue by closing corporate tax code loopholes and reverting taxation to Clinton administration levels. In contrast, Republicans seem to be pushing exclusively for spending cuts and do not want to entertain a plan that raises tax revenue of any kind.
Several plans have come out of talks and negotiations including President Obama’s original $4 trillion deal, Speaker Boehner’s “Cut, Cap and Balance” plan, the “Gang of Six” compromise, and Senate Majority Leader Harry Reid’s “bet you still say no” gambit, recently endorsed by Obama. But none of these appear close to an agreement, leading some to believe that America’s politicians are more interested in proving their opposition wrong than preventing a potential economic crisis.
As the deadline looms, the impact on the United State’s credit rating is already being felt. Even if the debt ceiling is raised, the lack of long-term security for creditors could still downgrade the U.S.’s AAA rating, putting stress on interest rates and the stock market.
Oops.
The Way I See It
"Obama, you seriously think my base will accept a boatload of cash, a new car for every Republican, and a free massage...from a BLACK president???"
Though I’m sure Congressional Democrats haven’t exactly made it a painless procedure for the Republicans to negotiate, it seems that Republicans are the most obstinate in their refusal to accept compromise. Rather than opting for a plan that would save over $4 trillion over 10 years, Speaker Boehner, under pressure from extreme elements in his caucus, insisted on deals saving closer to $2 trillion without generating any new revenues (essentially keeping the Bush-Obama tax cuts in place and avoiding restructuring of corporate tax law). This is the party that won the House in 2010 by promising fiscal responsibility. They made it clear they preferred to gut government before raising taxes, but when we’re talking about tens of trillions of dollars, wouldn’t many Americans agree that some increased tax revenue is worth the stability of the country?
On the other side, I see a lot of vitriol from the Left over Obama’s willingness to cut from entitlement programs. I’m literally seeing liberals suggest that we should be spending more on programs rather than cutting from them. While I support the ultimate aims of these entitlement programs, I think this entire situation demonstrates the danger of bumping up against the debt ceiling. And while frustrated Dems currently want the debt ceiling gone, I think they’d appreciate having it there if it was a Republican administration spending money on programs with which they disagree.
The fact is that entitlement programs take up a huge part of our budget. Such established government institutions are bound to have inefficiencies, redundancies, and wasteful procedures after over a half-century of operation. Obama has consistently appealed to a moderate base by proposing an efficient, leaner government. Any liberal who believes Obama was secretly gunning for a larger government that spent more than its gluttonous predecessors drank too much Tea Party Kool-Aid.
We may be too late to avoid some of the impacts on the economy. Honestly, if you were rating countries on their financial stability, would you give the U.S. the highest rating in the world? We’re continuing with the unsustainable trend of taxing the wealthy proportionally less than the middle class while trying to give naive voters everything they want and simultaneously promising to cut everything they dislike. Which just results in this mindless back-and-forth in the hands of the antagonistic political parties.
Honestly, this is all part of wake-up call that we could learn from. Our political, economic, and moral systems need to be revamped. We can’t rely on debt to do what must be done and we can’t trust mainstream politicians to take care of the very system they depend on.
Both sides need to swallow their medicine, accept concessions from their ideological extremes, and work toward finding consensus. It seems the only public figure that is trying to do this is President Obama.
Comment and Reply
- Are you concerned about the United States defaulting or losing its AAA credit rating? Why? How do you think it will affect you?
- What approach would you take to restore long-term fiscal stability?
- Did Obama look like he had just come out of a prison camp last night or was that just me?
Approved Reading
“Why Obama is eager and willing to make ~2.5 trillion in spending cuts in exchange for hundreds of millions of revenues.” – Collegiate Punditry ♣
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Of course I’m concerned with the U.S. defaulting. In the short term, I doubt it will affect me much at all, but as a young American, I fear a future where we get less and pay more, and and generally have a tougher economic environment in which to live.
Honestly, I’m for a radical new approach to the economic policy of the U.S. “Economic engineers” would design policy based on a powerful computer model, and try out dozens and dozens of scenarios until something really works. Sound impossible? Yes, but mainly because the politicians would never go for it.
I didn’t watch the speech. I was listening, but also reading comics, because that was so much more enjoyable and informative!
I fundamentally disagree with this line “I think they’d appreciate having it there if it was a Republican administration spending money on programs with which they disagree.” As much as the left disdains the Iraq War, at no point were they filibustering the raising of the debt ceiling.
This line doesn’t even make sense. “Both sides need to swallow their medicine, accept concessions from their ideological extremes, and work toward finding consensus.” Democrats aren’t asking for revenue increases, the Boehner plan has the same exact cuts as the Reid one, only the Reid plan includes the military cuts from declining operations in Iraq and Afghanistan as well as expanded Defense cuts.
Your article is sound but I just can’t agree with your conclusions. This is not simply partisan politics where rigid positions are preventing compromise, this is one group holding government hostage to get what they want.
@K’Nex: If we pay too little now for getting an excess, then wouldn’t it be better to pay more and get less?
I think that’s the fundamental change that has to happen to bring about a radical new economic perspective. Our current system is motivated by pure self-interest for short-term gain. If we gave up some short-term benefits for long-term stability, we might see ma more sensible approach.
@Marathon: I can’t speak for you, but you can’t speak for All of the Left. You may personally have concluded that a debt ceiling is a bad idea on the whole and “the Left” may be more prone to spending, but many liberals are quick to criticize the Bush administration for driving us to this point with the $5 trillion in debt his administration oversaw. At the time, Democrat Politicians might have not considered strangling their own spending sources for when they held power, but I think you’d find many liberal voters who would have liked to see Bush’s own “blank check” limited.
But yes, I’ll admit, today’s liberals (seemingly in response to the adamant Tea Party) are less likely to think limiting spending is a good priority.
As for pegging both sides, it was only this past week’s plan that took revenue increases off the table with the Reid plan, which Obama is supporting out of desperation. Initially, Obama was gunning for the grand bargain, including revenue increases (however technical) and cuts. But, this wasn’t the problem. I SUPPORTED this approach, because it was the type of compromise I was talking about.
When I say “both sides” I’m looking at the voters and the American population. The whole point is that the Left has been very critical of Obama for considering entitlement reform and program cuts and I haven’t heard a convincing argument for why we shouldn’t be limiting spending to avoid this very situation in the future.
I understand that we’re on a dangerous path here where we start to strangle the benefits of government, but it doesn’t mean we should exclusively entertain the other extreme. We need to REFOCUS our spending on helping the maximum number of people possible, rather than holding on to the so-called sacred cows.
Not that I think this is literally the choice we face today, but this represents my general philosophy: It’s worth giving up Medicare and Medicaid if we get universal healthcare. It’s time to streamline benefits and listen to the population. A lot of Americans don’t want to be this far in debt, they don’t want to keep raising a borrowing limit indefinitely, they want SECURITY. And since we’re captive to a psychological interdependent global market, we can’t afford to just stick our fingers in our ears and keep marching. Liberals who support government programs need to accept this to make real progress happen.
The Republicans may be holding the country hostage, but Democrats run the risk of giving them the shelter and weapons necessary to do so. Any policy that saves money AND increases revenue as a symbolic act to show that we’re resisting the oligarchy is a policy worth supporting. Let the Republicans do the in-fighting and, in this particular case, support the President.