Dear Congressional Republicans:
It’s time to compromise on the debt.
A House Divided
Working in Washington over the summer impresses upon you the deliberative and often sluggish nature of Congress. Following politics is just different when you work on the Hill- when you walk on the House floor on Friday and they are continuing a debate from the previous Monday, you truly come to understand the process. And while I have become appreciative that the system consistently produces thorough and enduring legislation, the time devoted to raising the debt ceiling has ballooned out of control. But how did we get into the current mess? Let us examine a short timeline:
December 1, 2010- The Bowles-Simpson Debt Commission released its report recommending approximately 3 trillion dollars in spending cuts and 1 trillion dollars in revenue increases (in other words, tax increases).
Fast-forward to February- The Republican controlled House passes a budget that would cut sixty-one billion dollars from 2010 levels. The Democratic controlled Senate kills the bill.
April 9- The President signs a budget that cuts 38 billion dollars from previous levels.
April 13- President Obama lays out a deficit-reduction plan that would save $4 trillion over the next twelve years.
May 9- Boehner joins the debate– any increase in the debt ceiling must be matched by spending cuts.
June 9- In a meeting with Vice President Biden, Geithner says that revenue increases must be a part of any debt reduction deal.
July 3- President Obama and Speaker Boehner meet to discuss $4 trillion in cuts, primarily through cutting spending programs and overhauling tax code (this is where revenue increases come in).
July 9- After meetings at the White House, Speaker Boehner publicly states that a “grand bargain” is not possible because Republicans will not agree to raise taxes.
July 13- Debt talks resume, with a fiery exit by President Obama.
But What is This Debt Limit Thing in the First Place?
Currently, the federal government’s expenditures are far greater than the revenue it takes in. This means that every day the government must borrow money to pay its bills. The current rule on the books caps the amount of money the United States can borrow at $14.3 trillion, roughly the size of GDP. If our debt hits that $14.3 trillion mark, we must either begin to default on our debts or cut spending each day by roughly 40%.
If we default on our debts, the United States would cause a worldwide economic crisis. Lewis Spellman, professor of finance at the University of Texas states, “It would be nothing short of a financial collapse that would take down the banks and the economy. The unemployment rate would go up as well. Simply put, the government would not be able to pay its bills. Once a default happens, any future borrowing would be at much higher rates of interest. Instead of paying 3 percent interest on borrowed money, we’d be paying closer to 10 to 15 percent.” Of course, while Michele Bachman continues her trend of mocking economic facts, this is reality. We cannot default on our debt.
If we chose to balance the budget immediately in order to avoid defaulting on our debt, we would need to significantly cut spending in a matter of days. To see what could possibly be cut, we should examine federal expenditures.
We could either cut education, defense, and health care or any number of combinations of important federal spending. Needless to say, completely slashing key federal programs would not only upset the American people, but would also have severe economic consequences.
Because of these factors, raising the debt ceiling should be a non-issue. It simply allows the government to pay its bills and cough up what it has already spent. However, Congressional Republicans have decided to make it an issue, so this is where we stand today:
The Democratic Stance:
The Democratic Party, led in negotiations by President Obama, is prepared to make huge concessions in exchange for Republican compromise. On the chopping block rests $4 trillion in spending cuts in exchange for the closure of some tax loopholes and elimination of the Bush tax cuts for the highest income bracket. Previously on the table was large-scale tax reform, but these discussions fell apart when the President called for a more progressive tax system.
The Republican Stance:
Republicans are undecided. On the Hill, the Republicans have no true leadership that can match the posture of the President. Instead, the Republican Party’s stance seems to come from many directions-Speaker Boehner, Minority Leader McConnell, Majority Leader Eric Cantor, and Rep. Michele Bachman.
Some Congressional Republicans refuse to vote for an increase in the debt ceiling regardless of what the president offers. Others will agree to raise the debt ceiling in exchange for significant spending cuts, but they will not agree to tax hikes, claiming that tax hikes will hurt an already stagnant economy. However, this spending-cuts-only solution to the debt problem contains a key flaw- while raising taxes does incur a detrimental effect on the economy in the short run, so does cutting government spending. If we really want to maximize economic growth in the short run, government expenditures should not even be considered on the chopping block. Moreover, thanks to Grover Norquist and his no-new-taxes pledge, Congressional Republicans must decide between possible re-election and doing what is right for the American people. All but 13 of the 288 Republican members of Congress have signed a pledge that they will not vote for any increases in taxes.
A Rock and a Hard Place
This leaves Republicans, especially leadership, in a difficult place, but it is time for House and Senate leadership to pull together and do what’s right for the American people. Politically, compromise will hurt Republicans; no one doubts that. But the President will suffer as well. Die-hard liberals have already expressed their political distaste that the President has postured himself as the moderate adult in the room on this issue. There is no doubt that the left and many independent voters do not want to see entitlements slashed. Appearing centrist may help him with independents, but he could easily receive less rabid support from the liberal base than he did in 2008.
Regardless of political suffering, the most important issue is what is right for the American people. Republicans, you were elected to do what is right, not what is necessarily best for your electoral prospects. We’ve always been the party to preach about doing what is right regardless of the consequences, and now is the time to show that we will. We built this mess over a series of years, both Republicans and Democrats, and now we have to deal with it. President Obama will compromise, and Republicans must meet him somewhere. Default is simply not an option.
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