Moody's Blues

Moody’s said this morning that if Congress can’t reach a deal to raise the debt ceiling by mid-July that they will cut the governments credit rating.  Conservatives will use this as an indictment of President Obama and his administration as always, but as I explained yesterday, such an idea is absurd.  The reason that this line of thinking is so ridiculous is because when you look at the economics as opposed to the politics, so much of our short-term economic problems – namely the problems we’ve experienced since Republicans took control of the Congress – could have been prevented if Republicans were more reasonable when it came to the economy and more willing to seek a bi-partisan approach to our long-term economic inhibitors.

Rather than pushing for a government shutdown, a default on the debt ceiling, and an end to Medicare, if Republicans had simply come in and worked with Democrats – as they claimed they would – to decrease spending we’d be looking at a much less bleak view of our economic situation than the one we currently have.  Instead, Republicans have decided to hold the government hostage over whether or not to even fund the federal government.  Republicans have held our nations’ credit rating hostage by refusing to raise the debt limit.  Republicans are continuing to hold our nations’ seniors hostage by attempting to privatize Medicare.  With all of this overwhelming evidence, it is clear that one side is trying to fix problems while one side is simply creating new ones.  The debt ceiling debate is a debate we shouldn’t even be having.  Even Reagan understood the economic implications of not raising the debt ceiling.  But Republicans simply don’t care.  They don’t care about the consequences of their actions because they are so hell bent on winning every single issue, no matter how microscopic its’ importance that they are willing to sacrifice the well-being of our country to further their own political agenda.

Mitt Romney announced he was running for President yesterday and in his speech he laid out an indictment of the President for problems that simply weren’t his fault.  The President inherited all of these economic problems from a Republican administration that waged an eight year war on taxes that has bankrupted our country.  The numbers are so undoubtedly clear on this point.  They are so salient in their objectivity and simple in their construction that I shouldn’t have to continually post the graphs on here to make my point, but I will because Republicans continue to argue about facts instead of arguing about policy.

What this graph shows us is something that everyone knows, but doesn’t want to admit.  We can’t continue the Bush tax cuts, period.  Not for the upper class, not for the middle class, not for the working poor.  They are fundamentally unsustainable.  I realize that this is not something people want to hear, but when you start looking at fixes for our problems most of them involve controlling costs moving forward and the biggest problem we face going forward are the deficits created by the Bush tax cuts and the increasing cost of sustaining a long-term military presence in the Middle East.

Republicans like to point to the stimulus and TARP and other recovery measures as being the drivers of debt.  One Republican Congressman said that “spending is the primary cause of the federal debt and deficit.”  That is just fundamentally not true.  The only way that that argument makes sense is if you consider the Bush tax cuts as government spending.  Basically Republicans have no answer for what they would have done if they were in the President’s shoes.  The reason for this is simple: it is impossible to say that there was a better way to approach our economic problems than the one the President implemented.  Now, it didn’t work as well as we all had hoped, but it did stem what looked like a double-dip recession and it was the President’s policies on TARP, the stimulus, and the Affordable Care Act that have put us in a position to rescue the economy from the dire circumstances that Republican leaders have put us in.

The simple truth in all of this is that for Republicans to blame Obama for the economy is the equivalent of blaming Charlie Sheen’s wives for the problems that he created.  This idea essentially says that “well, everything was fine before they got here” and that’s simply not the case.  We’ve had bad weather in America, but you don’t see me blaming Meterologists for climate change, that just wouldn’t make any sense and it is equally ridiculous for Republican leaders who signed on to the Bush tax cuts and the Bush wars in Iraq and Afghanistan to blame the current President for the mistakes of his predecessor.

The President is going to have to make some tough calls in order to get the debt ceiling raised because Republicans aren’t about solving problems, they’re about winning.  No matter how miniscule the issue, Republicans must win.  This “damn the consequences” approach to government makes about as much sense as playing Russian roulette.  It may seem like a good idea at the time, but in retrospect, it’s a really, really bad idea.  If the President agrees to Republican demands on entitlement spending (which he shouldn’t) the President gives up the only political trump card he has in 2012 and that would be a huge mistake.  The stated goal of Republican leadership in both the House and Senate, from day one, has been to make President Obama a one-term President.  We shouldn’t confuse their aims with the goals of the American people because they are so fundamentally different that most people are wondering why these things are related at all.

If we’re serious about the debt, we’ll raise taxes.  It really is that simple.  If this is political posturing, Republicans will go after Obama and force him to cut entitlements which is so politically disasterous idea that it shouldn’t be considered.  But this President has, at every point in his Presidency, been forced to make deals with people that want nothing else than to see him fail, which raises the fundamental question of “how can you work for the American people and promote your ideological goals at the same time?”  And the answer to that question is that you can’t.

Now there are real goals that we should be working for in the debt ceiling negotiations.  One is debt to GDP targets in the budgeting process.  What this means in lehman’s terms is that budget deficits in relation to GDP should not exceed 90%.  As soon as this happens we should have instant tax fall back plans that makes up the budget deficit.  These budget triggers will reduce the political risk involved in balancing a budget and therefore make such a goal much more realistic.  Second, we need to expand our baseline in the tax code.  51% of Americans don’t pay any income taxes at all and this needs to change.  We can create a simple baseline that raise revenues in proportion to our deficits without having a Congressional vote on tax increases.  These ideas, although they don’t sound too difficult are in fact, very hard to enact because of the Grover Norquist “no new taxes” pledge.  We need to work around that by allowing tax increases without forcing a Congressional vote.  It’s the only way we can bring our budget back into balance without jeopardizing the political careers of everyone involved and that thus makes it the only chance we have at actually achieving our long term goals.

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