“You’ll get mesmerized /By alibis/ And limbo dance in pairs/ Please lock that door/It don’t make much sense/That common sense/Don’t make no sense/No more”
It’s hard to believe that people we elected to represent us and who swore to act in the best interest of the United States and its citizens could have pushed the country to the brink of default just to make a political point.
But it’s true.
With about ten days to go until the Aug. 2 deadline for raising the debt ceiling, Washington has shown that it’s gone from being dysfunctional to being psychotic.
Our capital and our government have been dysfunctional for a number of years due to the inability of Democrats and Republicans to work together on anything. That had negative effects on the presidencies of Bill Clinton and George W. Bush, but the cancer of partisanship has metastasized in Barack Obama’s administration.
There’s enough blame to go around for both sides. But in the debt ceiling debate, the Republicans are acting crazier than the Democrats.
While Obama has laid out plans that include up to $4.5 trillion in deficit reduction over the next ten years, Republicans have turned them down flat. Why? Because, in addition to a lot of spending cuts that would trim programs that help lower and middle-income families, Obama has included tax increases on corporation and one the wealthiest Americans.
So have the “Gang of Six” in the Senate, which includes Virginia’s Mark Warner.
But Republicans, who have clamored loudest about the deficit (which they discovered about the time Obama was sworn in), have said that deficit and debt reduction needs to be done with budget cuts only. Some of the cuts they advocate are sweeping and would change Medicare and Social Security, as we know them.
It’s an example of just how unserious about deficit reduction they are. As recently as January they fought tooth and nail to retain the Bush-era tax cuts, which contribute to the deficit.
This attitude led David Brooks, a mainstream Republican columnist, to say that Republicans aren’t operating more like a normal political party.
He’s got a point.
Republicans are now acting more like a religious cult than a political party. They’ve raised a “no tax increases ever” ideology to level of Gospel. It’s the Church of Ronald Reagan, except that it’s run by people who have made commandments out of a few of the dumbest things Reagan ever said and ignore what he actually did while in office.
Because Reagan raised taxes when he felt he needed to. And the debt ceiling? It was raised 17 times during the Reagan administration. It was routinely raised under other presidents, Republicans and Democrats alike.
So why the hold up now? If you’re cynic, you might almost think that Republicans are trying to make the economy worse before the 2012 elections.
But let’s not infer bad motives, where incompetence and stupidity will suffice.
Let’s assume that Republicans really are concerned about the level of the budget deficit and the national debt. In that case, they should be falling all over themselves to accept Obama’s offer, which entails real long-term fiscal reform.
He’s offered cuts that will be very unpopular with Democratic constituencies.
But apparently that’s not as important as tax increases on the rich.
I’m not crazy about some of Obama’s tax ideas. I think, frankly, it would be good for the economy to get rid of the corporate income tax, which is a hidden tax on American consumers on one hand and only encourages companies to move profits off shore on the other. You could make up that revenue by taxing dividend, interest and capital gains income (except on the sale of a principal residence) at the same rate as wages and salary and re-instituting the estate tax.
Obama is calling a revenue and cuts approach “shared sacrifice.” It’s actually not fully shared since the cuts to program that benefit lower-income Americans are a much bigger than the taxes on upper income Americans. But at least it’s an attempt to say “We are all in this together.”
It’s one most Americans get, according to the polls.
It’s one consistent with the facts, since the current fiscal problems are caused both by spending at 25% of Gross Domestic Product, a level last reached in World War II and in federal tax revenues that are at only 14.8% of GDP, while they hovered around 18% for decades. No one is advocating continuing to spend at the level we have for the last three years when we’ve done TARP (which saved the country from Depression and is the last time Democrats and Republicans came together for the national good), the stimulus package (which didn’t stimulate the economy as much as was hoped), the auto company bailout and fought 2 1/2 wars. But Republicans are proposing to struggle along on the same historically low percentage of revenue.
But the shared sacrifices model is not one Republicans in Congress are willing to go along with. Instead, they’ve pushed the country toward default. Rating agencies are taking a look at downgrading U.S. debt. One small rating agency has already done so. If America’s bond rating falls, so will bond ratings for the states, including Virginia’s cherished AAA rating.
That will be the least of the effects of failing to raise the debt ceiling. U.S. default will likely trigger a new financial panic worldwide, ending the economy’s fragile recovery. Even by flirting with the specter of default, Congress has weakened the economy.
But that’s not the reason that members of Congress should be ashamed of themselves.
They should be ashamed because they’ve let the country get into this position and because some of them have been saying it “wouldn’t be so bad” if America defaulted?
Wouldn’t be so bad?
Forget the dire financial consequences that would follow a U.S. default as surely as night follows day. We don’t default for the same reason that we don’t torture captives or censor peoples’ mail or lock them up without trials. Because we’re America and we’re better than that.
The fact that some members of Congress don’t think we’re any different from some third-rate banana republic that won’t pay its bills makes my blood boil.
Some of the same people who appear so unconcerned about the prospect of American default have voted to make it harder for individual Americans to file for bankruptcy. It’s okay for the country but not for individuals? Does that make sense?
This is an especially bitter pill to swallow as it’s served up by the party that loudly proclaims its faith in “American Exceptionalism.” Isn’t the fact that we are the world’s lender of last resort, the one safe oasis where anybody in the world can park their money, part of what makes us exceptional? Isn’t the fact that the “full faith and credit of the United States” still means something part of why we’re exceptional?
I don’t understand how anybody who’s a patriot could joke about, much less seriously consider, allowing America to default. But then I don’t understand why anybody who is a patriot would bet against America by buying into a fund that shorted U.S. Treasury notes either. House Majority Leader Eric Cantor, who has positioned himself as the chief stumbling block to an agreement, did that.
Even if common sense prevails and the debt ceiling is raised before the deadline, the struggle has done damage to the economy. And it’s spotlighted the inability of the two parties to get beyond ideological struggles and do the people’s business. The concept of the “loyal opposition” is long gone from our political lexicon. The inability, of either party, to accept the results of elections and move on is an ominous symptom of Washington’s political psychosis.
Cross posted at Virginia Pundit.
VIVIAN J. PAIGE | All Politics is Local 
You know what this current crowd of GOP liars want is to turn the United Sates into China, where only a few giant corporations run things, they own the factories, the apartments, the grocery stores, the gas stations, the newspaper and magazine publications, the radio stations, the television stations and you pay them and they get all the benefits, and if you do not like it go jump off cliff. Well some Chinese workers seeing that as individuals that they cannot progress have done just that by committing suicide.
The current crowd of GOP liars want to steal Medicare from the elderly, they want to abolish a woman’s right to choose and have control over her own body, they want to abolish collective bargaining rights for our Unions, and on top of it all they want to blame the poor, the middle class and the public sector workers for a recession that the GOP created (Thanks to the Dullard “W”), while their beloved “Fat cats” continue to pay themselves exorbitant salaries, bonuses, fringe benefits.
The GOP is like the “Chicken Littles” always saying that the “Sky is Falling”, like the same ones that were the “Chicken Hawks” (“W” Wars), big talk no courage.
The United States, favors creativity wherever it can be found. We’re apostles of prosperity and defenders of the free exchange of ideas and when more people in more countries are free to rise, to invent, to communicate, to dissent, it’s not the doom of United States leadership, its the triumph of the American way.
Generations have worked hard and sacrificed much for the country to reach this point (individuals and our Unions that represented our poor, the middle class and public sector workers), and with further hard work and sacrifice (along with our relentless self-doubt) the United States will rise again, we do not tire and we are coming back, no matter what Fox news and their GOP “Chicken Littles” lackies keep saying about our nation. The win in New York was the beginning but the next will be Indiana, Iowa, Kansas, Michigan, Ohio, Wisconsin and later the other states of our nation, Never Bet Against the United States, watch out GOP, we are coming for you!
Are Democrats acting crazy at all in the debt ceiling debate?
Republicans made this their issue last year. And what better way to achieve maximal leverage? Some of these folks surely fear a primary challenge should they vote for a debt ceiling increase. And a lot of the freshman, at least publicly, brush off the idea that August 2nd is some meaningful date. So, here we are.
As far as I know the plans are just that. I haven’t read that they impact appropriations law or makes changes to the mandatory spending programs. And they certainly don’t identify where this 1, 2, 3 or 4 trillion is coming from. Let’s say just $2 trillion of that is discretionary cuts over 10 years. They need to then cut $200 billion every year to meet that goal. That would be a 15% across the board cut based on FY10 figures. Assuming, and of course this is an awfully when-pigs-fly assumption, that they cut defense by a percentage commensurate with the rest of discretionary.
The House has passed 5 of the 12 appropriation bills they need to pass. Haven’t read them, but haven’t heard that Republicans cut them by 15%. That would most certainly make news I would think.
And speaking of that, legislatures have this basic function to pass appropriations. We are going to go into yet another fiscal year, where they won’t have any enacted into law until well after the start of FY12 on October 1st. That means a lot of additional cost in contracting, obligating, and accounting work which is money just pissed away because legislators couldn’t do their job timely.
Good grief. First, the DEMOCRATIC Congress passed the extensions to the Bush tax cuts — plus the reductions in the FICA taxes — before the Republicans became the majority party in the House. The dems own that.
Now there is ZERO chance of default. There is more than enough money coming in to service the debt.
Also, there is ZERO chance that Social Security benefits will not be paid. The Trust Fund bonds are part of the debt, so all the Treasury has to do is sell general issue bonds and use the proceeds to pay the Trust Fund bonds. It’s a wash — the debt does not increase, and benefits are paid out of the Trust Fund.
Beyond that, you pay those who EARNED the money — employees (including the military), vendors, etc.
Run the numbers yourself at the Washington Post.
Ignoring Social Security — because of the bond issue mentioned above — I’ve still got $23.6B unspent. All you have to do is stop paying people who aren’t working for it.
Finally, the bond rating nonsense. Which is more likely — that we will be downgraded because we do not increase the debt (but still service the debt), or that we will be downgraded because we borrow even more money? Think of your own credit rating. Is it more likely to be downgraded if you refuse to take on more debt and cut your budget, or if you take out more loans so that you can borrow 40 cents of every dollar you spend?
It would be wonderful for you to explain to us your expertise in this area. I receive Social Security benefits, which I paid into all my working life. I would love to believe that this large percentage of my income is not in jeopardy, but I have seen no credible assurances that it would be the case. Your comment does not reassure me either, because it seems like it is 1) Based on a limited understanding of the debt problem, and 2) spewed like soda on my monitor screen.
Are you a government employee that deals with these issues each day?
Some of what you say here is unintelligible, which only heightens my decision to not listen to a thing you have said. As for not “…paying people who aren’t working for it.”, my question to you is, what the hell are you talking about? Those on unemployment through no fault of their own? Those who receive other payments that allow them to have a halfway decent life?
You have a habit of blabbering on about subjects, to the dismay of many who read here every day. The superiority complex you are packing is ugly, and your points, if you have any, are lost in your delivery.
Try harder to get your opinion or some facts across, so we don’t have to guess what the hell you are talking about.
As you can see here on the Treasury website:
The first thing in the following table is the Social Security Trust Fund.
Now, I will address the next question:
Actually, unemployment insurance benefits only go to those who paid into the system. So they “earned” it in that sense, and they are included in the list of items paid. (As for “fault,” much lies with those who made it illegal for people to work for what they are worth, so they are now unemployable.)
Payments? For what are they being paid?
Forgot to mention, there is also the “Department of Labor, Unemployment Trust Fund” which also factors into the debt limit. So payments out of that fund can also be made by selling general issue bonds, just like Social Security.
As the statutory limit applies to intragovernmental holdings as well, I don’t see how the Treasury replacing intragovernmental debt with public debt helps anything. If you use bonds, for example, to pay off an inter-affiliate loan; no new money has been created. If the affiliate is running a surplus and you a deficit, they will still need to lend you funds in order for you to continue operating. In that case, total debt has increased and you have blown the limit.
I don’t think there is some financing trick that Treasury would not have already thought of or that the Bipartisan Policy Center that put together the Washington Post analysis would have missed as well.
Fair enough. Let’s look at the August 2nd payments.
In August, we need to pay $49.2B for Social Security, and $12.8B for unemployment. Those both have trust funds which hold bonds issued by the Treasury. So, The Treasury sells $62B in general issue bonds, and uses that cash to redeem $62B in Trust Fund bonds, and the Trust Funds use the cash to pay the benefits. The intragovernmental debt goes down by $62B, and the debt held by the public goes up by $62B. The total debt subject to the statutory limit does not change.
As you say, we did not create new money, but changed the owner of the bonds from the Trust Funds to the public. Of course, since the Trust funds do own the bonds, one might think that those bonds could simply be sold to the public. However, Congress made that illegal.
The off-budget items (the trust funds) are running surpluses according to Treasury. So, you have given them cash, that they don’t need. Technically, I wonder how they would not pay OASI. If they use FICA to fund something else, they have created an intragovernmental loan that then blows the debt limit.
I’ll have to check, but I do not thing FICA is now running a surplus, because of the two percent reduction in the tax rates the dems passed in December.
FICA is not running a surplus for 2010:
http://www.usatoday.com/news/washington/2010-02-07-social-security-red-retirements_N.htm
Treasury’s FMS site is currently down so I can’t link to it. The article you reference is old. But you can look at the SSA’s site and verify that at least for 2010 the fund still ran a surplus. As the 2%, that had no effect on the OASDI funding. The law made the funds whole by making up the difference with general funds from the Treasury.
http://www.ssa.gov/oact/index.html
When FMS is back up, you can check their cash reports. That is where I got the off-budget surplus info from. You don’t need to rely on a CBO projection when you have actual data available.
Either way, we are not currently running a surplus in the Social Security Trust Fund.
Fair enough. Let’s look at the August 2nd payments.
In August, we need to pay $49.2B for Social Security, and $12.8B for unemployment. Those both have trust funds which hold bonds issued by the Treasury. So, The Treasury sells $62B in general issue bonds, and uses that cash to redeem $62B in Trust Fund bonds, and the Trust Funds use the cash to pay the benefits. The intragovernmental debt goes down by $62B, and the debt held by the public goes up by $62B. The total debt subject to the statutory limit does not change.
As you say, we did not create new money, but changed the owner of the bonds from the Trust Funds to the public. Of course, since the Trust funds do own the bonds, one might think that those bonds could simply be sold to the public. However, Congress made that illegal.
And I suspect that both the Treasury and the Post have thought of it. However, they both want the debt limit raised. (Never let a crisis go to waste.)
Oh, and get an editor.
Please re-read the comment policy and understand it. Comments such as this are not acceptable. You have been warned many times.
My apologies. Most times, I just point out a misspelling or a grammar error, it is fixed and my comment is deleted. There are just too many here to do that.