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.
  

Where's Me Money, SpongeBob?

For years the rich got richer and everyone else, including the middle class, saw real income slip. Deficits ballooned, government oversight and regulations eased and no-bid contracts were awarded to favorite contractors. Greed and corruption permeated business practices. The SEC ignored credible warnings of a massive Ponzi scheme. Where was the leadership? Where was responsibility and accountability? It was time for a change in direction.

Last November Americans voted for change. The newly elected President warned that change would not be easy, that it would be a difficult challenge to restore the nation's ailing economy and confidence in government. Now those who led America into this dark and uncertain crisis are speaking out against change. Many on Wall Street and Republicans have declared that this is President Barack Obama's recession, even though he has been in office for barely six weeks. His policies, they say, are the reason America is in trouble.

They have taken to the airwaves, to print and the Web to excoriate President Obama. They accuse Obama of doing too little, while at the same time doing too much. They complain the President is not moving fast enough, while at the same time accusing him of moving too hastily.

They are pounding away at Obama's tax plan, which raises taxes on Americans making more that $250,000 per year, while increasing taxes on capital gains and dividends. The top tax rate will go up from 35% to 39.6% when the Bush tax cuts for the rich lapse. Obama is being accused of socialism and his plan is described as, brace yourself, radical. "This is the reason the stock market has crashed," yelled one commentator. "It's class warfare," screamed another. In the words of Mr. Crabs, "Where's me money, SpongeBob?"

The Republican strategy is simply to say no. There is no real leadership within the party, except for entertainer and radio talk show host Rush Limbaugh. And he has rallied the beleaguered right wing by calling for President Obama to fail. This icon of the conservative movement recently bounced on stage at the CPAC meeting in Washington, dressed in a black jacket and black silk shirt opened at the neck. His flashy eyes, fleshy chest and flabby girth were symbolic of a Republican party that feasted for eight years on Bush deregulation and government deficits.

"We can take this country back," he declared. "We conservatives have not done a good enough job of just laying out basically who we are because we make the mistake of assuming that people know." Memo to Limbaugh, America already knows. "We love and revere our founding documents, the Constitution and the Declaration of Independence," he continued. "We believe that the preamble of the Constitution contains an inarguable truth, that we are all endowed by our creator with certain inalienable rights, among them life, liberty, freedom. And the pursuit of happiness." So, therefore, the President should fail?

Freedom of speech is an essential principle of our great democracy. We have long benefited from our diversity and differences of opinions. New ideas and constructive criticism lead to a stronger and healthier nation. But when criticism is emotional, vacuous and divisively strident it can be destructive. Driving a political wedge through the heart of this country will result in further chaos, confusion and great harm to the health of America.

It is time for calm voices and thoughtful ideas. It is time to come together as one nation. Rather than thinking about the next election cycle, it is time to do what is best for our children and for America.

What is Fair?

President Barack Obama has repeatedly spoken of the sacrifice all Americans will have to make in order to get this country back on track. Now, as he begins to take steps to meet the challenge of restoring our economy and building a strong foundation for our future, some people are calling his initiatives unfair.

Was it fair that this country's debt more than doubled over the past eight years? Was it fair that unnecessary and wasteful spending was allowed to continue during that period? Was it fair that largely unregulated banks were allowed to make huge profits on complicated and obscure money schemes that still today plague the world's economy? Was it fair that mortgage-lenders preyed on aspiring homeowners, lured with visions of having a piece of the American dream? Was it fair that speculators flipped properties faster than a Roger Clemens fastball? Was it fair that some homeowners decided to reach beyond their means in an effort to have a bigger house and a huge payoff someday? Was it fair that, while all this was going on, Congress had devolved into bitter political gridlock based on political agendas and egos? America and most Americans chose not to acknowledge the financial bubble was growing, that the system was wildly over leveraged and that it could explode at any moment. What was everyone thinking?

Now all Americans are on the hook big time. The government has thrown billions of dollars at a failed banking system in an effort to stabilize the economy. Is that fair? The government has bailed out insurance companies. Is that fair? The government has allocated billions of dollars to American automobile companies with failed business plans. Is that fair? Now the government has passed a multi-billion dollar stimulus bill to preserve or create jobs. Is that fair? Meanwhile, plants are closing, 401K's are shrinking, housing values are declining, employment lines are growing as is the number of Americans who do not have proper health care. Is that fair?

In his proposals, President Obama has tried to balance what is best for the country with what is fair for each individual. This is a nearly impossible task. Take Obama's housing plan, which could cost taxpayers as much as $275 billion, but may help as many as nine million homeowners avert foreclosure. Critics are yelling "unfair" because the plan is rewarding "bad behavior." But haven't we already rewarded bad behavior? It was even suggested that a Web site be created where Americans could vote on whether they "really want to subsidize the losers' mortgages." Sure, and maybe we can vote on all those other government bailouts too!

These are not ordinary times, so extraordinary steps must be taken. While differences of opinion should be heard, at the end of the day actions must be taken now. President Obama was elected to lead our country in a new direction. He is quickly addressing the numerous problems that afflict our country and threaten its future. His remedies are not perfect for each American. It will take time; it will take patience. But it is time to lower our voices, reduce partisan bickering and self-interest. It is time to step up and increase our willingness to move forward as one nation.

Recently Cardinal Cormac Murphy-O'Connor, the Archbishop of Westminster, declared, "It's the end of a certain kind of selfish capitalism." He continued, "(This is a time) when we have to reflect...on what are the things that nourish the values, the virtues, we want to have." He concluded, " Capitalism needs to be underpinned with regulation and moral purpose."

Let us all reflect on what made our country great as we try to make America healthy again.

Debate the Economy

Senator John McCain's campaign is melting down. And sadly this great American hero continues to use desperate tactics, deception and distortion which is increasingly damaging his campaign.

McCain's latest tactic is to "suspend" his campaign and to request that Friday's presidential debate from the University of Mississippi be delayed. Certainly, the historic financial crisis facing our country today is potentially catastrophic. But wouldn't it be a better idea to change the topic of the debate to the financial crisis and the domestic economy? The debate can be moved to Washington DC, near the Capitol Building.

Americans need what has been lacking for the past eight years, strong leadership. Wall Street needs to see that someone with a clear vision and firm hand will take control of the economy. What better way to inform Americans than an economic debate between the two presidential candidates.

Or Senator McCain, is this delay a tactic? Did you notice that your poll numbers are beginning slip? Are you having difficulty in coming up with a clear position on the Paulsen plan? Are you embarrassed that Freddie Mac paid your campaign manager's company through last month? Are you rethinking your position on deregulating healthcare, the same position you have advocated for years for banking? Are you worried that First Lady Laura Bush says Governor Sarah Palin lacks foreign policy experience?

More than 40 million television viewers would tune in for this first in a series of four debates, including one between the two vice presidential candidates. These debates will be a major factor in how millions of people cast their ballots this November 4. The debate's experienced moderator, PBS's Jim Lehrer, can ask economic questions, and give both you and Senator Obama ample time to spell out your views.

Today we are faced with financial crisis of historic proportions. Its affects are being felt around the world. This is the time for answers, ideas and leadership. Do not delay Friday's presidential debate. Move it to Washington and change the topic to the economy.

Maconomics 101

During the primary campaign Senator John McCain once admitted to the Wall Street Journal editorial board that he "really doesn't understand economics." When I first read his remarks I assumed the Republican presidential candidate was just being modest.

Since then, and on several occasions, candidate McCain has stated that this country's "fundamentals" are sound. Of course, I thought he was speaking of the economy. Or maybe he was paraphrasing Republican President Herbert Hoover, who said, "no one can rightly deny the fundamental correctness of our economic system."

When I hear the term "fundamentals" in the context of bank failures, increasing unemployment and rising prices, I think of financial measurements. The business publication Forbes actually provides a definition on its web site: "The qualitative and quantitative information that contributes to the economic well-being and the subsequent financial valuation of a company, security or currency." For businesses, information such as revenue, earnings, assets, liabilities and growth are some of the fundamentals. Analysts and investors analyze these to estimate the value of an asset.

Of course, McCain is a maverick. McCain often sees things differently than the Washington establishment. He even eschews the Internet. So it was no surprise when yesterday, at an evening campaign stop, Senator McCain provided a whole new definition for the word fundamentals: "the American workers." Therefore, when McCain says the "fundamentals are sound," he means that the American workers are skilled, hard working and resourceful. Conversely, when Democrats say the fundamentals are not sound, they are unfairly and foolishly attacking American workers.

McCain plays if from the gut and he has proven, from time to time, to have good instincts. Certainly the selection of Governor Sarah Palin as his running mate shook up the campaign and has brought him into a virtual tie with Obama/Biden. But today the fun is over. The economy is in dire trouble. The ripple effects of today's financial crisis will be felt by all Americans for years to come.

Now is not the time to play word games. Now is the time for strong economic leadership.

President Herbert Hoover also said, "Blessed are the young for they shall inherit the national debt." I only hope that there will be something left for my child to inherit.