The Debt Ceiling Debacle

Watching Republicans talk about the debt ceiling is a lot like watching what happens when you take a toy away from a child.  There’s no reasoning with them.  You tried politely asking for them to stop making all sorts of noise and to play in a reasonable matter and yet they still don’t stop, so you’re forced to take the toy away.  So, they cry and cry and cry.  Crying isn’t going to get you your toy back, but it does produce a scene and in this kind of a situation, the only thing that’s being produced is a dramatic scene that people are embarrassed to even look at.

Speaking of watching, John Boehner, Eric Cantor, and Kevin McCarthy want to play politics with everything, even office space.  Eric Cantor let Kevin McCarthy, the number three Republican on the hill, take the office that is usually given to the Majority Leader (Cantor’s post.)  The reason behind this?  From the office that Eric Cantor picked out, he can keep his eye on everybody else.  Because Eric Cantor’s office is so strategically located, not only can he can see everyone who comes and goes from Boehner and McCarthy’s offices, he also can move aides into place to bombard them and essentially filibuster them when necessary.  Apparently Cantor has little else to do with his time than sit back like some sort of James Bond villain and plot his next, sneaky, and sinister move.

Since I’m on the topic of small ball, Harry Reid is pushing the outrage button on Wall St.  Reid said in a press conference on Tuesday:

“Cuts to oil company subsidies could bring in between $20 billion and $40 billion over 10 years, taxing hedge fund managers’ earnings as regular income would amount to roughly $20 billion more over a decade, and the much-heralded jet tax would yield an additional $3 billion, according to various estimates from Democratic and Republican sources.”

That adds up to somewhere between $43-80 billion in tax increases that don’t sound that out of line.  In fact, compared with what we should have done to these people, they’re relatively mild.  The bigger question, for me at least, is why Democrats aren’t going after the Bush tax cuts in an effort to seriously address the debt.  If you want to solve our fiscal problem, that is how you do it.  I know I’ve been flashing all sorts of charts showing the impact of the tax cuts, but this point really can’t be overstated, especially in the context of the fact that we did not pay for the wars in Afghanistan and Iraq.

What’s worse is that if you look at what Congress is trying to do to stimulate the economy in the short term, you inevitably come to the conclusion that attempting to solve our short term crisis only leads to longer projected deficits.  The costs of another “repatriation” holiday are staggering in how they affect total government revenue.  But, because of the stalemate in Washington, it may be the only thing the two sides can agree upon to show the public that they’re trying to do something, anything really, to address the concerns of middle America.  The problem with these short term political fixes however, is that they usually lead to bigger deficits down the road and this “repatriation” holiday idea is just the latest that shows Washington isn’t serious about actually controlling the debt, they’re simply concerned about being blamed for the poor recovery.

The thing that bothers me the most about the debt ceiling negotiations is that they have less to do with solving the debt problem and more to do with each parties’ political priorities.  For Republicans, it’s about protecting the top 1%, who are making a ridiculous amount of money and for Democrats, it’s about preventing the middle class from sliding down into the lower class.  This hardly seems like a fair fight.

The point of all this is that the one thing Republicans refuse to budge on is the one thing that is stunting our economic growth.  Tax cuts are the number one driver of debt and Republicans like to talk about “achieving fairness in the tax code,” but that doesn’t mean the same thing to them that it does to us.

It should be noted that the one thing that Paul Ryan claimed was his number one priority with his budget, turned out to be his last priority in reality.  You don’t propose tax cuts that are bigger than the Bush tax cuts that got us into this mess if you’re serious about solving our debt crisis.  You propose tax cuts because it’s the only economic thinking that you know or understand and that’s quite telling.  The lack of a substantive policy on tax reform that actually attempts to achieve tax equality as oppose to marginal rate cuts (which actually increase the deficit) shows just how seriously Republicans take our nation’s debt crisis.

Now, the chart above looks at the increased costs of the debt, but most Republicans are fond of talking about the “unsustainable” path we’re on in terms of GDP.  But, no matter how we look at it, whether it’s as real money or in real GDP, the problem is self-evident.  Everything that we’re doing, whether it’s tax cuts, wars, stimulus, TARP etc. is government spending and should be viewed as such.  Republicans talk about government spending as only the amount of money that the government spends on social programs, which is a ridiculous premise to start with.  Tax cuts come from the government, defense spending comes from the government, TARP and the stimulus came from the government.  The fact of the matter is that Congress approved all of this spending and it is therefore all “government spending.”

So, if you’re going to talk about government spending, you’ve got to include it all as government spending, not just count the stuff that you don’t like as government spending.  That’s like me trying to sell you on the advantages of smoking.  It’ll make you feel different, hell, it’ll change your life, but that doesn’t mean that smoking is going to solve your problems, in fact, it creates more problems than it solves.  But, because I don’t raise the health aspect, it’s not that bad because it sounds like there are no downsides to smoking and this is exactly what Republicans are saying with the debt.

Republicans are saying that only spending on social programs should be on the table, tax cuts can’t be touched, and we’re somehow going to balance the budget by enacting tax cuts that actually spend more money.  If it seems hard to take Republicans seriously on this issue, that’s because it is.

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