Debt Ceiling Showdown

No wonder Congress is so unpopular. Last year's House and Senate teamed up to be the most ineffective Congress in decades. Sadly, the new Congress looks like it is going to underperform its predecessor.

In the next few weeks, Congress must decide whether to raise the debt ceiling. Under law, the debt ceiling limits the U.S. Treasury's authority to borrow money to pay for decisions already enacted by Congress and the president. In other words, the government needs Congress's approval to raise money to pay its bills.

If Congress fails to raise the debt limit, America will be in default. In 2011, the rancorous debate over raising the debt limit caused bond-rating agencies to downgrade America's credit. Though the debt ceiling was raised, the government (i.e. taxpayers) had to pay higher interest on money it borrowed.

The near crisis also had an adverse affect for America in the global markets.
So here Americans are again, after surviving the end of the world, supposedly predicted by the Mayans, and after avoiding the fiscal cliff, on the verge of yet another financial crisis. The fact that Republicans would use raising the debt ceiling as "leverage" to secure deep budget cuts, largely in entitlement programs, is irresponsible.

In his appearance on ABC's This Week Sunday, Senate Minority Leader Mitch McConnell ruled out additional tax increases as part of a debt ceiling or deficit reduction deal. "That's behind us. Now the question is, what are we going to do about the biggest problem confronting our country and our future? And that's our spending addiction. It's time to confront it," Senator McConnell said. "The president surely knows that. I mean, he has mentioned it both publicly and privately. The time to confront it is now." Senator McConnell indicated he would not approve action on the debt ceiling without sizable budget cuts.

But, in his weekly radio address, the president, who was able to get Congress to pass tax increases on high-income earners, was adamant about not using the debt ceiling as a bargaining chip. "One thing I will not compromise over is whether or not Congress should pay the tab for a bill they've already racked up," President Obama said. "If Congress refuses to give the United States the ability to pay its bills on time, the consequences for the entire global economy could be catastrophic. The last time Congress threatened this course of action, our entire economy suffered for it. Our families and our businesses cannot afford that dangerous game."

America is in the midst of a slow recovery. Unemployment is still unacceptably high, and consumers are wary of the future. Yet who can blame them given Congress's erratic behavior. Most Americans feel a responsibility to pay back the money they owe in a timely manner. They full well know the consequences of failing to do so, including having their credit rating reduced.

If Congress fails to act it risks another downgrade of U.S. Treasury bonds. Brian Kessler, of Moody's Analytics, told MarketWatch, "For the last 60-ish years, U.S. Treasury bonds have been the foundational rock of the entire world financial markets. A second downgrade could be like an earthquake on that financial rock." He added, "I'm very nervous that people in Washington don't really take that seriously enough."

In the 2011 debt ceiling debate, The Economic Policy Institute said that failure to raise the limit would create, "a massive shock to the economy." It further warned, "Social Security checks would be cut, doctors would not be reimbursed in full for seeing Medicare and Medicaid patients, and private contractors doing business with the federal government would not be paid." Ditto for 2012.

Making matters even more complicated are upcoming debates over the "sequester" spending cuts to defense and domestic spending, agreed to as part of the 2011 debt ceiling deal, and a stopgap bill that will likely be needed in March to keep the government operating.

Congressional Republicans must act responsibly by putting country ahead of partisan politics. They must vote to raise the debt ceiling. American cannot endure another self-inflicted wound from Congress.

The U.S. Constitution defines the powers it grants Congress. They include: "The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defense and general Welfare of the United States." If Congress fails to raise the debt ceiling it will weaken the country and fail to provide for the general welfare of the United States.
  

Stalemate Standoff

President Barack Obama and House Speaker John Boehner held dueling prime time addresses to the nation and even disagreed on whether there was a stalemate over the debt ceiling. That is the problem in a nutshell.

President Obama, for the most part, was cordial while speaking from the White House East Room. He laid out the debt ceiling crisis facing our nation's economy and called for compromise and a balanced approach. His position is to take on government deficit spending through budget cuts and some increased revenues.

But Republicans have adamantly refused to raise revenues. "Republican House members have essentially said that the only way they'll vote to prevent America's first-ever default is if the rest of us agree to their deep, spending cuts-only approach," President Obama said. He pointed out that there is a lot at stake, "If that happens, and we default, we would not have enough money to pay all of our bills -- bills that include monthly Social Security checks, veterans' benefits and the government contracts we've signed with thousands of businesses."

For his part, Speaker Boehner was partisan and forceful in his remarks from his ceremonial Capitol Hill office. "The sad truth is that the president wanted a blank check six months ago, and he wants a blank check today," Boehner said. "That is just not going to happen."

Six months ago the president wanted a clean extension of the debt ceiling. But Republicans and some conservative critics refused saying that passage must be linked to cuts in future government spending. The debt ceiling is now $14.3 billion dollars, so 40 cents of every tax dollar collected goes to service the debt.

Just a decade ago the U.S. government had a surplus. But President George W. Bush enacted huge tax cuts, including for wealthy Americans, initiated two costly wars, and passed a huge prescription drug program that were all unfunded. The recession, which increased costs and decreased revenues due to high unemployment, added to the red ink.

In the face of GOP resistance to pass a clean debt ceiling bill, the president then shifted his position by agreeing to consider cuts, including in entitlement programs, as long as some revenues were included. Revenues would come from closing tax loopholes and placing more of a burden on the nation's wealthiest income earners. Progressive Democrats howled over possible cuts in entitlements, such as Medicare, Medicaid and Social Security. But Tea Party Republicans howled over any possible revenue increases.

At one point last week the two sides were close to a deal, with Speaker Boehner apparently agreeing to $800 billion in revenues. But when the president asked for $400 billion more in revenues Speaker Boehner broke off talks with the White House. Instead, House Republicans worked over the weekend to craft their own proposal, which calls for a two-step plan for $2.5 trillion in budget cuts with another debt ceiling vote in six months contingent on Congress agreeing to further deep budget cuts. Meanwhile, Senate Majority Leader Harry Reid and Democrats crafted their own proposal which calls for $4 trillion in cuts over the next ten years, no revenue increases and extension of the debt ceiling until after the 2012 presidential election.

Of course, President Obama opposes the latest Republican proposal because it has no revenues and would mean the government would face another budget crisis early next year--before the 2012 presidential election. And there is a report that the Boehner proposal would lead to a downgrade in America's credit. Meanwhile, Republicans oppose Reid's proposal because they say it relies heavily on gimmicks. Stalemate anyone?

In his speech Monday night the president decried the "partisan three-ring circus" in the nation's capital. He said, "The American people may have voted for divided government, but they didn't vote for a dysfunctional government." He even cited the fact that Republican icon President Ronald raised the debt limit eighteen times during his presidency, and President George W. Bush did so seven times.

President Barack Obama has made major concessions throughout the negotiations. And Senate Leader Reid has now made a major concession on revenues in his latest proposal, which the president today indicated he will support. But Republicans are likely to hold their ground against the Reid bill, even though failure to past the debt ceiling may have devastating consequences on the already struggling U.S. economy.

President Obama called the crisis a stalemate. Speaker Boehner said there is no stalemate because Republicans have a plan. Perhaps Republicans are counting on failure to pass the debt ceiling as the best way to assure President Barack Obama will be a one-term president.

It's Not My Default

Republicans and Democrats are on a collision course over raising the nation's debt ceiling. Failure to do so will have dire consequences on all Americans and the global economy. Regretfully, it is politics as usual in Washington.

Most experts agree that failure to raise the debt ceiling will cause the United States to default. The consequences of a default will be catastrophic on the already frail American economy. Government payrolls and entitlement programs will not be funded. Interest rates on loans will increase. More people will be thrown out of work. And such a failure will send a tsunami through world economic markets, which are already teetering because of Greece, Italy and Ireland. The global standing of America will be rocked and confidence in the U.S. economy will be severely shaken across the world.

Up to now raising the debt ceiling has been more or less a routine matter. Most Republicans did not blink when it came to casting their annual approval during the deficit-riddled administration of President George Bush. President Bush ran up huge deficits due in large part to his unfunded tax cuts and two wars. What has changed?

Republicans have seized on the debt ceiling crisis to gain deep cuts in the U.S. budget, perhaps following the axiom, "Never let a crisis go to waste." They see an opportunity to scale back future government spending in order, they say, to achieve long-term financial stability and grow more jobs. But so far recent government cuts on the national and state level have resulted in thousands of layoffs as well as reductions in education and critical services.

While President Barack Obama and most Democrats agree that some cuts are in order they have argued for a "balanced" approach. That means addressing the problem by raising some revenues, for instance by closing corporate loopholes and increasing taxes on the wealthiest individuals. Not to do so will put the burden on those least able to afford it. And, according to a recent poll, a large majority of Americans agree with this approach. However, Republicans firmly proclaim that raising any taxes will kill jobs. Never mind that there is no historical evidence to back their claim up.

So the two sides have dug in. Negotiations have reached a boiling point. Republican Speaker John Boehner is struggling to keep his caucus in line, with many of its members willing to let the nation to go into default. Most of them say that the impact of a default will not be too severe a price to pay if it results in deep spending cuts. Many have signed a no new taxes pledge. Republican Majority leader Eric Cantor is leading the hardliners, and may be positioning himself for the Speakership.

Meanwhile, negotiations at the White House to end the impasse continue. Accounts of these meetings vary depending on the party spinning the story. Did Rep. Cantor interrupt the president several times? Did a frustrated president abruptly walk out of the meeting? Who cares? Republicans say the debt is President Obama's problem. Democrats say it is the Republicans who are putting the country at peril.

It is time for all parties grow up. It is time to act in the best interest of the nation. It is time for our elected officials to cast partisan politics and petty rivalries aside and to put America first. Either pass a clean debt ceiling bill or compromise on managing future deficits with a mixture of budget cuts and some revenue enhancements. And then let the voters decide in 2012 which side it supports.