All right, so we’re edging closer to the precipice. As I write, we’re about 3 1/2 hours from a Senate vote on the Democratic debt ceiling bill, which has already been put to a show-trial vote in the House, where it failed. August 2nd was the target date Treasury set a few months ago as the last day America would have enough money to pay its bills. There is talk it could be extended, with further financial legerdemain, to August 10th. No one can say with absolute certainty – well, okay, the TeaHeads are absolutely certain nothing will happen – what our financial landscape will look like after that, but warnings are all over, from the ratings agencies, the IMF, and the business sector. Now, I find the handwringing by the raters and business in general to be bitterly ironic, as they helped create this debacle, but more on that another time.
First, some thoughts on the basics:
1. The Republicans, driven by their far Right, picked this fight. The debt ceiling has been raised many times, under both Republican and Democratic presidents, with Republican and Democratic majorities in Congress. We’ve never been driven to the brink of default by ideology before. The debt ceiling was raised 17 times under Ronald Reagan, 4 times under George Bush Sr., 5 times under Bill Clinton, and 7 times under George Bush the Younger. In Clinton and Bush-the-Younger’s cases, Congress had Republican majorities for nearly their entire tenure. Reagan had a Republican Senate majority for most of his terms, as well as a working majority in the House. And a quick check will show that many in the Senate and the House who are now blocking an increase in the debt ceiling have routinely supported it in the past. This time, however, they see a means to hit Barack Obama (remember, Mitch McConnell made Obama’s defeat in 2012 the Republicans’ top priority) and a chance to make a full-frontal attack on domestic programs, particularly Social Security, Medicare, and Medicaid.
2. And they have, for the most part, already won. If some kind of deal is reached, it will surely be composed almost entirely of spending cuts, and those will come almost entirely from domestic, non-military spending, although the Democratic thinking includes reducing the money spent on military actions in Afghanistan and Iraq. It is likely there will be “reforms” to the Big 3, as well. And it is just as likely no increased revenue will be part of the deal.
3. The deficit, and by extension, the national debt, are not the result of runaway domestic social spending. Not to sound like a broken record, but we had a more-or-less balanced federal budget on January 20th, 2001. Between then and 2008, we backtracked, running about $200 billion into the red. The main drivers were tax cuts, two wars put on the national credit card, and the Republican-driven changes to Medicare, particularly the bar against Medicare negotiating prescription drug prices. But then, as Dean Baker notes – Baker on the deficit – the housing bubble collapsed, setting off a chain reaction in financial markets that ended up sending the economy over a cliff and costing millions of Americans their jobs. (Let it not be forgotten that the housing bubble was created in part by the de-regulation of the financial industry at the end of Bill Clinton’s term and the headlong push for low-income homeownership driven by the Bush administration.) The Center on Budget and Policy Priorities CBPP, and the Pew Center Pew offer some useful analyses. Oh, and if those are too “liberal” for you, consider the observations of Bruce Bartlett, former Treasury official under Bush Senior and domestic policy advisor to Ronald Reagan – Bartlett.
So, even if we get a deal, we will not address the causes of the deficit, we will not make the necessary investments to get the economy running again (investments that would pay off in higher employment and additional revenues down the road), and we will cripple our ability to provide a modest measure of security for millions of our people.
Nice job, guys.