As I’m writing this, Congress and President Obama are still trying to work out a deal on raising the debt ceiling so the country can pay its bills. By the time you read this, hopefully they will have worked out a reasonable deal, and not reached a situation where we will see what happens if the United States actually defaults on payments that were promised.
Whether or not a deal has been reached, this whole debacle has illustrated a major problem with our government, and in this instance, the Republican Party. People have been looking at this like it’s a referendum on spending. The Republicans have claimed that they are doing the responsible thing by reining in government. But the reality is that this is such an irresponsible thing to do, to the point of it being ludicrous.
This is not a negotiation over the budget, or whether things such as Social Security or Medicare should be funded. It is actually a fight over whether we should pay what we already decided on. To illustrate, we can use an example that was recently disseminated by a major news network.
The best way to illustrate it is that Congress has already ordered a pizza, which they did when they passed a budget at the beginning of the fiscal year. They approved the toppings, and all the side dishes. They called up and asked that someone deliver it. The pizza guy is now knocking at the door, asking to get paid. If the debt ceiling is not raised, they are in essence saying they now don’t want the pizza.
Is that any way to run a country? This debt was already decided, and we have to follow through on our commitment. Then the discussion should begin as far as next year’s budget. This is a dishonest and grandstanding ploy by the Republicans that needs to be seen for what it is by the public.
I do believe spending is out of hand, and needs to be dealt with. But this is not the way to do it. But the President needs the votes of the Republicans in the House, and to his credit, he has agreed to compromise. In fact, he has compromised so much that he has gone way too far for most of the Democrats, and even gone farther than a bipartisan group of Senators went in a proposal to solve the issue. Yet Republican leader John Boehner walked away from the table, not accepting even that compromise. Reportedly after a call to Rush Limbaugh, by the way, just to show how low the Republican Party has stooped in this endeavor.
Some of the Republican proposals even call for unrelated issues to be dealt with, such as repeal of parts of the health care bill. And they absolutely have refused to consider anything that raises any tax. In fact, they stretch the idea of ”raising taxes” to forbidding any loopholes to be closed, such as ones that allow multi-millionaire hedge fund managers to pay a tax rate of 15 percent, lower than you probably do. And one that gives tax breaks to oil companies that are making billion-dollar, record profits. And the now infamous tax break for owners of private jets.
If Republicans were serious about our debt situation, they wouldn’t be holding those tax loopholes sacred. Their standard answer is that raising taxes will result in job losses. If you can find one reputable economist that thinks slightly lower profits at oil companies will result in mass firings, or that hedge fund managers will fire their staff because they have to pay the same tax rate as everyone else in the their income bracket, it would shocking.
Another fallacy people have been holding out is that we should just not pay back the money to the foreign countries that hold our debt, consequences be damned. That is also ridiculous. We owe most of the debt to ourselves, eight times the amount we owe China. The Chinese actually own only about 8 percent of American debt. Much of the debt is held by American families. We all know people who have U.S. Savings Bonds. Do you think it’s a good idea to not pay those people when the bonds come due?
Under President Bush the debt ceiling was raised routinely, so the Republicans didn’t care when he was spending money at a record clip. In fact, in terms of new programs (including stimulus spending, the wars in Iraq and Afghanistan, the infamous Medicare Part D drug benefit, bailouts and the tax cuts he enacted while doing all this new spending), the cost of the new spending was $5.7 trillion. Under Obama, new spending has only been $1.44 trillion. So the motivation is obviously political. And it’s a disgusting picture of the Republican Party that they would risk something as major as default based on politics.
I am very much a fiscal conservative. But the time to deal with the issue of spending is when the budget is being formulated, not when it’s time to pay the bill. However this is being resolved, it is a sorry state of American politics, and even if it is resolved successfully, there is the possibility that the credit rating of the U.S. could be lowered, which will cost us untold billions in extra interest payments, since the credit rating determines the interest rate we pay.
As some people have pointed out, including former President Clinton, there is the possibility that a President could just raise the debt limit any time they wish. The 14th Amendment states, “The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned.” Essentially, an argument can be made that since the “public debt” cannot be questioned, then the debt ceiling itself is unconstitutional. As we showed earlier, the debt has already been incurred; it’s just making the payments that has been the issue!