It was hardly a bold prediction in my post on April 13th that although the government shutdown crisis had been averted, the hard work to put the economy in line had just begun. Well, here we are ahead of the August 2nd deadline to raise the federal debt ceiling and still no deal. An agreement would allow the federal government to resume borrowing somewhere north of $100 billion a month to meet its obligations.
According to Wikipedia: “The modern debt limit, in which an aggregate limit was applied to nearly all federal debt, was established in 1939. The Treasury has been authorized by Congress to issue such debt as was needed to fund government operations as long as the total debt (excepting some small special classes) does not exceed a stated ceiling.”
While perhaps a good idea in theory, what’s the point of a ceiling if it constantly gets raised? Since March 1962, the debt ceiling has been raised 74 times, according to the Congressional Research Service. It’s been raised ten times since 2001 alone.
Voting against raising the limit seems to have become a platform for making a political protest vote against an administration’s budget plan. In fact, President Obama voted against raising the debt ceiling in 2006; a vote he now calls “a mistake.” Currently, we have the Republican controlled House of Representatives refusing to raise the ceiling without significant spending cuts.
I believe the Republicans are trying to make a very important point here. For the last several years, the national debt reached a level where it significantly threatens the economy and our future. As of today, each American’s share of the debt is $46,144.14. Making payments on just the interest alone is becoming a major economic burden for our country and our future. We must, collectively, take real steps to start walking back this debt monster. And we must do it NOW, with a significant deal that makes our country start to live within its means.
However, the current stalemate in Washington DC is a political abomination. The fact we’re in even in this situation right now is an embarrassment and glaring sign of government dysfunction. The house minority leader, Mitch McConnell, recently said on the Laura Ingram show said “I refuse to help Barack Obama get reelected by marching Republicans into a position where we have co-ownership of a bad economy.” If the Republicans would go so far as to send our country into default by refusing to let Obama appear to have a victory is absurd.
In any negotiation of government budgets, money out (spending) and money in (taxes) are the two areas of negotiation. It appears to me that Democrats are willing to take some pain and make some painful (and long overdue) cuts to programs popular with their base. But Republicans are refusing to negotiate a tax increase, even highly targeted increases to the wealthy individual and corporate interests based on blind ideology.
It’s a stubborn refusal that is sending our country to the edge of an abyss. It’s unknown full the consequences of a default, but at minimum, interest rates would spike (increasing the debt dramatically), our credit rating reduced, our weak recovery hobbled, and our economic standing with the world forever tarnished.
In times of such raging domestic disagreement, it can help to get some perspective from outside our borders. The new head of the IMF, Christine Lagarde, recently said the following:
“I would hope that there is enough bipartisan intelligence and understanding of the challenge that is ahead of the United States, but also of the rest of the world.”
I believe you have the essentials of the debate correct. However, political motives on both sides have to be accounted for. You have some of the Republicans motives listed (ideology, anti-tax rhetoric, political opposition). However, the motives for compromise on President Obama’s part also has to be taken into account. In proposing a solution (one that includes tax increases and entitlement cuts) he is appearing to compromise. However, he knows that the tax increases will be impossible for the large cadre of Freshmen Republican legislators to accept and therefore they will reject the proposal. This allows him to look like the mediator, an adult figure if you will. If they do compromise he gets to take the credit for the solution (as long as its on his terms).
The Republicans have also proposed a solution that you left out, one that includes a Balanced Budget Amendment to the Constitution in exchange for raising the debt ceiling. This, a drastic change to “business as usual” in Washington is likely to be soundly rejected by the Democrat controlled Senate (for reasons of ideology) but may very well pass the Republican controlled House. Proposing this type of compromise bill does the exact same thing President Obama did in putting the ball in the other side’s court. Both Republican and Democratic media surrogates have done an excellent job characterizing the stalemate as the fault of the other side but in reality ideology and political concerns color all of their actions.
Both sides have drawn lines in the sand and there are some very good proposals in the wings. An acceptable compromise, however, remains to be seen.
I agree with most of what you say here. There is plenty of room for compromise here, but the looming political debate is getting in the way.
I have been saying recently that our governmental inefficience is the result of a too short election cycle. As soon as a presidential election is over, we are faced with midterm elections. As soon as the midterms are done, we are talking about the next presidential election. Many of our elected officials are more focused on re-election posturing and positioning than governing. The obscene amounts of money that is poured into campaigns results in elected officials fundraising more than doing the work for which they were elected.
The two-party system contributes to the bickering as opposed to negotiaitiang good results and building alliances that allow laws to be passed that are targeted and meaningful.
There is a movement that i have seen to elect mediators to office, as they are focused on interests, compromise and results rather than positions. It certainly would be worth a try. It cannot be worse than the folly about which we read on a daily basis, that is a poor excuse for responsible governing and government.
Jacob — Thanks for your sharing your perspective and focusing on the political motives behind both parties in the negotiation. My overall point was that both parties need to put country first, party second; but party motivation on both sides can’t be ignored. Obama and the dems no doubt want to position themselves as the good guys, and blame the other side for failure in making progress. I think it’s unfortunate such a large number of GOPers have taken “no new taxes” pledge as it limits their ability to compromise — even with a deal that reduces spending at several multitudes higher than new taxes. A balanced budget amendment might indeed be a way to limited the governments ability to make new debt in the future, no matter which party is in power. We need to realize that our federal debt is just too high to support new Keynesian spending measures and that spending our way out of a slump is not sustainable in our future. State-level balanced budget amendments have been in place foe years and while not always popular, force states to carefully consider their budgets. Such a law appears to have helped Germany, well be Germany, whereas countries like Greece sink further into the hole.
Tom — Thanks for your comment. I agree that political pressures are keeping our leaders from working towards a solution together vs. answering to their base. Two year terms in the house are way too short, especially considering the cost of elections. I think these should be bumped to at least four years (while keeping the Senate at six). Thanks for pointing out some of the disadvantages of our two-party system. We, of course can’t rely on the either of our two parties to prioritize that cause. In fact they can be quite hostile. I think the push for steps that can help introduce credible third parties, such as instant runoff voting, needs to be pushed by the masses at the center.
If you need to forecast, forecast often.
One’s mind has a way of making itself up in private, also it suddenly becomes clear what one methods to do.