A lot of the debt ceiling debate is marked by credentialist arguments ("Joe Blow, famous economist, favors MY plan, so it must be good!") or just chanting of slogans, enforcement of "pledges" made to non-government entities, and basic fear-mongering and bullshit.
What is the real deal on the debt ceiling? Is our national debt going to bankrupt our country? Or is our failure to deal with the debt the REAL problem? A little of the former and a lot of the latter.
There are a lot of misconceptions about the debt, and here are a few I think need to be clarified.
1. It's Obama's Fault: Budget bills, under the Constitution, are to originate in the House of Representatives. Thus, it is the responsibility of the House, not the White House, to present a budget bill and also to figure out the debt ceiling. Rep. Boehner, as leader of the majority is thus responsible for bringing a bill to the House floor that will pass, pass the Senate, and be signed by the President. Boehner is the man in the hot seat, and yet he passes the buck to Obama or Harry Reid.
2. The debt will kill the country: While debt is bad (the entire point of my blog is about being debt-free) the dire predictions about the national debt are a little overstated. Yes, our debt is about equal to one year's GDP in this country. But then again, a typical American has debt equal to several years of their personal GDP. So this is hardly a staggering amount. In addition, our GDP is down, which makes the debt seem higher. Once the economy recovers, the debt load, as a percentage of GDP, will decline. And as revenues increase with the GDP, we can pay it down.
3. Debt is responsible for the recession: Actually right now, the reverse is true. Economists have long argued (and been proven right) that when you have a recession, the best thing to do is spend your way out of it. It sounds dumb, but it works. In 1929, Hoover tried to cut back on spending, and this served only to make things worse. Roosevelt spent money on public works projects and got the country moving again. The pattern has been repeated again and again over time. When government "primes the pump" it gets people working. When you cut government spending right now, it will throw a lot of people out of work, and increase the length and depth of the recession - right into an election year. This indeed, is probably the Republican's plan - to exacerbate the recession so they can elect one of their own in 2012. Remember this - the GOP is making you suffer so they can get elected to Office. Can you think of another political party in the 20th Century that destroyed its own economy just to get into power? Hint: It was in Germany.
4. Obama Caused the Debt: Conservatives like to point to the stimulus package as the cause of our debt. But the bulk of our national debt is quite old, and a lot of it was incurred during the Bush era, when we spent large to go after Al Qaeda. During boom times is when we SHOULD cut the debt, but since it seems small as a percentage of GDP, no one does. Although Bush and the Republicans controlled the Government for 8 years, they failed to live up to their fiscal conservatism and cut the budget - rather, it increased. During the first two years of the Obama Administration, more debt has been incurred for unemployment, welfare, and of course, the stimulus package. But if we didn't spend that money, we would be in a 1929-like Depression right now.
5. The GOP Will Create Prosperity By Eliminating Debt: This is a nice fantasy, but in reality, what this amounts to is maintaining tax cuts for the rich, while cutting the Social Security and Medicare that the middle class has relied up for retirement. And since their bungling of the debt problem (and downgrading of U.S. Bond ratings) has severely damaged the economy (the Dow has lost ALL GAINS since January of this year - in one week!) many of the middle class are facing a bleak retirement, of ravaged bank accounts, cuts in Social Security, and limited medical care. Meanwhile, the tax brackets for the very wealthy remain cut.
6. The GOP Will Cut Your Taxes or Has Cut Your Taxes: The GOP runs on a platform of tax cuts - both in terms of income taxes and in things like the gifts and estates tax. Poor people mouth the language of Fox News Talking Points - "I'm Taxed Enough Already!" But as I noted in an earlier posting, if your combined income is below $60,000 (the average American) then you never saw a penny of the "Bush Tax Cuts" as you are in the unchanged 15% bracket. Even if you made more than this ($100,000 to $150,000), you saw little in cuts. It is only when you make a quarter-million dollars or more than you see any serious cuts. And as far as the "Death Tax" is concerned, you will never pay it anyway - unless you are a multi- multi- millionaire. Yet poor people continue to believe that Bush "cut my taxes!"
7. The Debt Ceiling Deadline is Arbitrary: In two days, the Government will have to shut down many offices. Contractors will remain unpaid. I suspect that Social Security checks will go out on time, and even debt payments will be made. But there will be another government shutdown, and it will not be good for the economy or for the people.
8. We Need to Cut Entitlements: While a lot of people are collecting welfare, most entitlements are paid out to people who PAID INTO the system. Most Social Security recipients have paid into the system and expect to get paid back. As I noted in that previous posting, Social Security, on average, pays you back what you paid in, plus a paltry 2% interest. It is hardly a "government giveaway" but more of a loan program. It was a promise - just as a government Bond is a promise (and not a "transfer of wealth scheme"). You pay in, you get paid back. More welfare reform is a good idea, but cutting Social Security - or worse yet, instituting a "needs test" just turns it into what the teabaggers claim it already is - a transfer of wealth scheme.
9. It is impossible to balance the budget any other way than to cut, cut, cut: We have some of the lowest tax rates in the world. And in the middle of two major wars, our last President decided to CUT taxes further. We have to pay our bills, and this means paying for the war in Afghanistan and Iraq. It means paying for all the pork-barrel spending the GOP Congress engaged in, during the Bush years (and they engaged in a LOT, which is disappointing to a fiscal conservative!). And yes, it means we have to pay for the stimulus package as well. The Bush-era tax cuts for the very wealthiest brackets need to go away. And these were not huge cuts - only a couple of percentage points. The very wealthy can afford a couple more percentage points in taxes - but it will mean big increases in revenue for the country.
Here is a chart of the actual tax rates. Again, if you make $60,000 a year or less, you are in the 15% bracket. Show me on the chart where you big tax cut is....
1993 saw a tax hike on the wealthy (via two new brackets at the top), and then 2001 through 2003 saw a series of tax cuts (the so-called Bush tax cuts) that lowered the tax brackets as follows:
1992 1993 -
2001 2002 2003 -
15% 15% 15% 10% 10% Same
10% 15% 15% 15% 28% 28% 27.5% 27% 25% 25% 31% 31% 30.5% 30% 28% 28% 36% 35.5% 35% 33% 36% 39.6% 39.1% 38.6% 35% 39.6%
So what is the solution? Compromise. That is how politics work, period. The majority of the Democratic Party and a large portion of the GOP are prepared to compromise. But Rep. Boehner, for some reason, thinks that the only way to pass a bill is to get all Republicans on-board and forget about the Democrats. But a Republican-only bill will not pass the Senate or be signed by the President. Boehner is bowing to a small minority of Republicans - and an even smaller minority of Americans, in drafting his legislation. When we let loud, vocal minorities (often misguided) dictate events, very, very bad things happen.
When your 401(k) evaporates, and inflation surges because our bond-rating drops to AA - and the US is no longer viewed as the "safest investment on the planet" - remember who to thank - the guy in the photo above, and the "new" fiscally irresponsible GOP.
When you retire and find that your Social Security is cut and your medicare is a "voucher" good for one free doctor visit, remember who to thank - the GOP.
The Republican Party has fallen on hard times - lack of leadership. We need great leaders in this day and age, and what do we get? Donald Trump, an actor who plays a Millionaire on TeeVee - and Sarah Palin, a media floozy who decries media floozies.
You have to wonder what Barry Goldwater would have said (WWAuH20D?). Certainly not this nonsense...