We may or may not be close to a debt ceiling deal. But the damage has already been done. This crisis was utterly and completely unnecessary.
The national debt has been built up over many decades and both parties contributed to it. I won’t get involved in the pointless argument over which party is more at fault – Republicans and their constant tax cuts, Medicare Part D and wars; Democrats and their stimulus spending and general refusal to cut entitlements. Both are responsible. And the reason? Because the American people want a free lunch, the middle class in particular. We want the same social welfare programs that other Western countries have (despite the superficial and dishonest talk of “self-reliance”). But we don’t want to pay for those programs. So we borrow to pay for them.
Ironically enough, most of the source of that borrowing is from US investors, including institutional funds that middle class people support through 401(k)s, municipal taxes and pensions. The debt crisis is real, and may threaten our AAA bond rating, but it can be dealt with during budget negotiations next month. Surely the threat of government shutdown will get politicians to take the debt issue seriously, if that is what the deficit hawks wish.
But never should this crisis have been tethered to the debt ceiling vote. Never. The debt ceiling vote is a vote over whether or not the Congress should pay its debt THAT IT ALREADY AUTHORIZED. It is like running up a large credit card debt and then deciding that the way to cut that debt is to refuse to make a minimum payment. Considering the stakes and the divisions involved – and the very real possibility that no solution will be reached at this time – the risk of failure means default. And large-scale interest rate spikes. And permanent and possibly irreparable damage to the financial standing of the United States (which, despite the current debt and sluggish economy, is still the most respected in the world).
One of the first rules of child-rearing is: don’t threaten to take a privilege away from your children for misbehavior unless you really plan to follow through. I have no doubt that the hard core Tea Party right really does plan to follow through. They are that reckless and ignorant of modern economics and governance. But the leadership of the Republican Party knows better. They have no intention of letting the US default, and are now panicking at the monster their own side created. They should have told the Tea Party militants to hold this fight next month over the budget. Threaten to shut the government down, if necessary. That is something the GOP could fully unite behind and follow through on if necessary. But playing chicken with the debt ceiling means that you might have to swallow something catastrophic.
The greater irony, I suppose, is the Republican demand that we have this fight again in a few months. The thinking up to now is that without another debt ceiling fight, Obama would have a “blank check” to “increase spending.” Forgot for a moment the substantive dishonesty of that statement – this is not about further spending; it is about paying bills we have already incurred. No, think of the political silliness of that. Does anybody really believe that another debt ceiling battle would actually help the Tea Party get its message across? Does John Boehner actually want to have this fight again? As much as Obama has suffered, Boehner and the House GOP has suffered far worse. They should be thankful that the Democrats have offered to take this off the table until 2013.
There are times to pick serious political fights. The debt issue is a serious one and will require major concessions from both sides. The only way to fight the debt problem is to increase tax revenue and cut spending. And that means raising taxes on the middle class, not just the rich. It also means cutting entitlements and defense. Everybody must pay.
But this debate has shown that we have come nowhere near agreement on that broad compromise. Grover Norquist still holds a self-appointed veto over the GOP and any plans to increase taxes (or even let the Bush tax cuts expire). And House and Senate liberals still have enough clout to scuttle any serious entitlement reform – including raising the retirement age.
Let’s have that debate next month when the budget comes up for a vote. If no deal is struck, and the government shuts down, the world economy will still go on. We survived 1995.
But even threatening to refuse to raise the debt ceiling is so irresponsible that those who have pushed us to this brink must be removed from political power as soon as possible.