To be sure, the debt-ceiling drama that played out during the past month or so in Washington, D.C., was a crisis manufactured by the Republican Party. The real crisis may be that unless voters make the Republicans irrelevant, government will be unable to raise the level of revenue sufficient to jumpstart the economy in the short run and pay for high-quality public services in the long run.
During the past few decades, whenever the president has needed to raise the arbitrary cap on how much the U.S. government can borrow to pay its bills, Congress has raised it. It's happened dozens of time.
President Obama wanted the same before Tuesday, the day when the U.S. treasury was expected to default on its debt. But the Republicans, the leaders of whom voted to raise the debt ceiling for George W. Bush without fuss, wouldn't do it unless it was accompanied by spending cuts massive enough to put a dent in the nation's multi-trillion-dollar deficit. The Tea Party activists among them vowed to vote against lifting the cap under any circumstances, on principle.
Obama offered huge spending cuts as long as he got tax increases resulting from closure of loopholes in the tax code that are aimed at easing the tax burden for the wealthiest Americans. In opinion polls, Americans said they liked that balanced approach.
Indeed, a balanced approach is what was used during the Reagan, Bush 1 and Clinton administrations when they and Congress charged into battle against rising deficits. In fact, a bill that Reagan signed included more in tax hikes than in spending cuts. Obama's offer was downright Republican by comparison—it was 25 percent tax increases and 75 percent spending cuts.
But we have a new breed of Republican now, one that apparently views government as evil. The plan seems to be to slowly choke it to death, starving it of revenue as the costs of caring for a rapidly aging population and fighting perceived foreign enemies continue to rise.
The old guard of the Republican Party, personified by Senate minority leader Mitch McConnell, has cynically seized this new dynamic and has used it—quite masterfully—to his advantage as he sets about his stated primary goal: to make Obama a one-term president and usher in a new president that would preside over an extreme right-wing social and economic agenda. Some Monday-night quarterbacks were declaring McConnell the big winner in the wake of this so-called crisis.
But what about Obama? For the moment, he can be seen as nothing but a loser. First he wanted a clean debt-ceiling increase without deficit reduction, and then he wanted tax loopholes that benefit rich people closed. He didn't get either. For all their complaints about not being happy with the outcome, the Republicans got exactly what they wanted: spending cuts with no new revenue. It was essentially a repeat of what happened late last year when Obama wanted to maintain the Bush-era tax cuts for everyone except top earners. Republicans wanted everyone, including the top earners, to keep their lower tax rates. The Republicans won.
This, despite the fact that the Democrats control the presidency and the Senate. Obama scored a good—but not great— healthcare overhaul, but the battle bloodied him. He had a chance to do some serious Wall Street reform, but his efforts pretty much maintained the status quo. He has achieved some smaller progressive policy changes, but in the big-ticket economic arena, he's failed.
We don't see hope up ahead. The so-called bipartisan “super-committee” established by the debt bill to further reduce the deficit is doomed to fail because the Republicans on it will have to pass a no-taxes litmus test to gain membership, and the Democrats on it will insist on some new revenues. That stalemate will trigger an indiscriminate mix of across-the-board agency cuts—agencies that provide public services—and defense cuts (the only silver lining to be found) that will hit us hard at the back end of the bill's 10-year timeframe.
Because of the aging population, taxes will have to be raised at some point—that's not a policy argument; it's a fact. Our only hope for it to happen sooner rather than later is that Democrats and rational high-profile Republicans no longer in the Beltway can convince voters in swing districts, before November 2012, that putting off the inevitable for long will spell economic disaster.
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