Debt Ceiling Debate

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Conventional wisdom is that cutting spending during a recession is a terrible idea. The predictions for what will happen as a result vary from stalling the recovery to a doomsday scenario of driving the US and the rest of the world into a nose dive.  

I’m not an economist but it makes sense to me that cutting spending will cost jobs, which won’t help. At the very least, many public sector jobs will disappear the moment any new lower budget goes into effect. Some may call this a good thing but might think better of it if they live in a rural part of a State that (even at current funding levels) are planning to go to 4 day school weeks in the fall as a cost saving measure. This after the Secretary of Education testified to Congress that we need longer days/longer school years to regain our competitiveness. Or if they live in Alto, Texas where they are so broke that they had to fire their entire police force.

I caught Paul Ryan from Wisconsin being interviewed. He said that to get their support for raising the debt limit, the House Republicans would not accept any new revenue, not even by closing tax loopholes. He does want the loopholes closed but not until they can be enacted in a “revenue neutral” way. Revenue neutral? He means having corresponding and offsetting tax cuts. For instance, say you have to give up your mortgage deduction for your yacht as a second home, Senator Ryan wants a sufficient tax cut to make up for this reduction in your income. Actually this may be a tiny sign of progress, he’s too nervous or embarrassed to even say “tax-cuts.” 

Speaker of the House Boehner also said that the Republicans would not consider any tax increases in order to get GOP support for raising the debt limit. None. He went on to say that the American people don’t want a tax increase. He maintains the discredited theory that cutting taxes for the rich and corporations will create jobs.

What I want to know is what are the Republicans smoking. The fact is that only 4% of Americans join them in believing that the tax breaks corporations enjoy are going toward new jobs. Boehner’s notion of what the people want is not even close to reality. According to a NY Times poll: 56% of Americans don’t feel that corporations are paying their fair share. 81% favor a tax surcharge on people earning over  a million dollars a year. 

The corporate tax rate is 35%. However if they pay at all, many of the largest and most profitable pay an effective rate of much less. For instance, CitiGroup paid about half of the 35% (16.9%) in 2009 and the result: in 2010 they reduced their workforce by more than 5,000. GE paid only 7.4% and they got rid of around 17,000 employees.

Why would the House Repubs be so unyielding on the issue of tax increases for those who can best afford it and at the same time favoring huge cuts in some very needed programs? I tried to thresh out possible reasons and came up with these:

  • They are lackeys of the big companies that fund their campaigns
  • They are willing to crash the world’s economy in the hopes that it will deny Obama a second term
  • Greed and corruption
  • Don’t give a rat’s ass about anyone but themselves and their corporate benefactors
  • All of the above

There is one other possible explanation that I hadn’t considered. David Brooks, a  conservative columnist wrote in his  NY Times Opinion piece: 

“The GOP may no longer be a normal party, but rather a movement of fanatics with a sacred fixation on tax cuts. Over the past few years it has been infected by a faction, that is more of a psychological protest then a practical governing alternative.” ~ David Brooks, New York Times 

Basically, in a very educated way he’s saying they’re nuts, whacked, loco, loony tunes. If he’s right, where does that leave us and what can we expect? Well, for one thing, we can’t count on them to sign off on raising the debt ceiling. Then what would happen?

The President has the right (and constitutional obligation) to continue paying on our debt. He can do this by using the revenues as they come in to the government. He has the authority to do this unilaterally. The funds coming in are already committed to something else so he would have to decide which line item to take the funds from. If it comes to this, the first thing he should do is utilize the funds that would normally go for salaries and benefits for the House of Representatives. 

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