President Barack Obama has told Republicans to grow up and do their jobs while the Senate has canceled its July Fourth recess, supposedly to work on a deal to allow the U.S. to keep borrowing money while lawmakers come up with a way to reduce spending. So, will anything happen?
The U.S. debt ceiling will be raised — it has to be to avoid an international financial crisis. But, there will be a lot of political theater — and needless insults — before it happens.
To oversimplify: The federal government is running up the budget deficit because it is spending more money that it is bringing in. The government can keep spending because others, namely China, buy U.S. bonds. If the U.S. defaulted on its debt, the consequences would be felt far beyond our borders. This doesn’t mean the overspending should go on forever, but talk of not raising the debt ceiling is meant to score political points, not to solve the underlying problem.
In a recent series on the federal deficit, The Washington Post examined how the federal deficit went from a predicted $2 trillion surplus to a $10 trillion deficit in just a decade.
“The biggest culprit, by far, has been an erosion of tax revenue triggered largely by two recessions and multiple rounds of tax cuts,” the paper wrote in an April 30 story. “Federal tax collections now stand at their lowest level as a percentage of the economy in 60 years.”
Also contributing to the mounting debt were the wars in Iraq and Afghanistan, which were funded outside usual budget constraints, the new Medicare prescription drug benefit and the Troubled Asset Relief Program, also known as the bank bailout. These items accounted for 12 percent of the shift from surplus to deficit, according to the Post, although it pointed out that, after repayments from financial institutions, TARP may cost nothing. The 2009 stimulus package has added about $719 billion to the deficit, or about 6 percent, the Post reported.
So, to reduce spending, emphasis must be put on ending the wars — which is under way, but progress is slow — and reducing entitlement spending, which is anathema to most Americans and the Democratic Party.
At the same time, the elimination of tax cuts and perhaps even tax increases — despite Republican outrage — must be part of the discussion.
Instead, the president and Senate minority leader held dueling press conferences this week. It is understandable that Congress is sharply divided on this and other issues because the public has varied opinions. The job of Congress and the president, however, is to cut through those differences to reach agreements that will restore fiscal balance. Calling one another names and drawing lines in the sand doesn’t further that process.