Losers All Around in Debt Limit Debate
The House narrowly passed John Boehner’s debt ceiling, debt reduction package on Friday with no Democratic votes. Senate Majority Leader Harry Reid , due to the 60 votes needed to break a filibuster, is unlikely to get much further than his 53-vote majority for his own version of the legislation, and even if he did, his bill, in its current version, could not pass the House.
The president continues to tell the American people to email, call, and tweet GOP members of Congress on behalf of a “balanced approach” (to include “revenues” ), though even his fellow Democrat, Harry Reid, abandoned such an approach a week ago, instead offering a spending cuts only approach to deficit reduction. Reid, of course, is trying to protect his members from having to cast a vote to raise taxes, given that near half of the 23 Democratic -held Senate seats up in 2012 are potentially at risk.
A few dozen Blue Dog Democrats in the House walked the plank voting for ObamaCare in March 2010 and, after the 2010 midterms, were out of a job. For the uninitiated, "revenues" are the new code word for "higher taxes," much as "progressive" has replaced "liberal" in the political lexicon. From now on, April 15th is "Revenue Day," and Democrats only seek more revenue, not higher tax rates.
We have on our hands a colossal mess, in which no one seems to have improved their standing with the public, and it is unclear how this will get worked out in the next few days. The investment markets, after assuming this was politics and posturing, as usual, and that everything would work out in time, are now considering for the first time the real possibility of a deal not getting done by the Treasury Department’s announced deadline of Tuesday, August 2. That date may be a soft deadline, it turns out. The stock market had its worst week in a year in the week ending Friday, and if no resolution appears imminent on Monday, it could be the start of another heavy down week. Harry Reid is hoping Senate Minority Leader Mitch McConnell can save him and the president from appearing to be the obstructionists to getting a deal done, now that the House for the second time in a week has acted and passed a bill that he and the Democrats tabled.
The bond rating agencies, which have warned that raising the debt ceiling may not be enough for the nation to maintain its AAA credit rating, without a significant deficit reduction effort in the coming years, may now conclude that Washington is too dysfunctional to take any crisis seriously. That dysfunction, as Charles Krauthammer suggested on Friday, is inevitable with divided government between two political parties with significantly different visions for the country’s future. President Obama, who has run up annual deficits of $1.5 trillion a year, will have more than doubled the nation’s total external debt by the end of his first term. That number is now $9.7 trillion (out of total national debt of $14.3 trillion, the remainder representing debts the government owes itself) and Obama has added nearly $4 trillion to that total in 2.5 years.
Add another $2.4 trillion for the remainder of his term, and near 55% of total external debt for the country’s 200 plus years will have been accumulated in just four years. But listen to liberal members of Congress or the president, or read liberal writers like Jon Cohn of the New Republic and Paul Krugman of the New York Times, and the real problem is that the debt is not growing rapidly enough -- that the stimulus should have been larger and needs a second giant tranche now. And these writers have dreams of future entitlement growth, and “vital” new spending programs (clean energy, education, high speed rail). Just as any cuts to existing programs are draconian, all new spending is vital to “winning the future" and job growth. The possibility that the Keynesian approach of massive deficit spending as the way to work a nation out of a recession has been consistently proven wrong, or has achieved its goal only during World War 2 (when economic growth was an afterthought to spending to win the war), is simply not considered. The nation is now experiencing an extraordinarily weak recovery, perhaps a double dip recession, and government stimulus (the gap between spending and “revenues”) is 45% of total spending, and over 10% of GDP. But this is not enough stimulus for the left. That next injection is the one that will create jobs and growth.