John Boehner eyes up a vulnerable Obama ahead of debt talks.
Diarmaid Murphy
How did the US come so close to disaster?
In recent years, the US Federal Budget has been heavily in deficit. In 2011, roughly 40% of federal spending is being funded by borrowing. The significance of the August 2 deadline was that the “debt ceiling”, the figure above which the US Treasury cannot go when borrowing money, was about to be exceeded. Quite simply, the Treasury was forbidden by law to borrow any more money, despite borrowed money being necessary to pay off the country’s existing bills. This leads to the issue of how the US borrows money.
Until 1917, Congress had to authorise every act of borrowing by the Treasury. This cumbersome process was then replaced by the introduction of the now-infamous debt ceiling. How does the debt ceiling work? In simple terms, the Treasury has the authority to borrow as much money as is needed to pay the country’s bills, as long as the total amount borrowed does not exceed a figure specified by law, i.e. the debt ceiling. That might lead you to think that having a debt ceiling acts as a restraint upon excessive government borrowing.
Except that’s not how it works. The debt ceiling caps the amount of money the Treasury can borrow to pay for government expenses. These expenses, and the deficit they create when they exceed revenue, are a result of past actions by Congress to create entitlement programs, make appropriations and cut taxes. In that sense, raising the debt limit is about paying for past expenses, not controlling future ones. So, an increase in the debt limit simply allows the Treasury to pay off the tab that Congress has already run up. It does not in any way, shape or form authorise increased future borrowing.
Since its inception, raising the debt limit has occurred as a matter of course. Perhaps Republicans have forgotten that the ceiling was increased no less than eighteen times by Reagan, and seven times by Bush junior. But in perhaps the most appalling display of anti-democratic brinkmanship witnessed yet under the modern GOP (and that’s saying something), the Republican-controlled House made it known that it would not vote in favour of increasing the debt limit without simultaneously introducing a savage regime of deficit reduction, consisting entirely of spending cuts, with not a cent of adjustment occurring through tax increases.
As I explained earlier, raising the debt ceiling has NOTHING to do with reducing the national debt. The debt ceiling only became an issue because the Republicans made it an issue. Lacking the democratic mandate to implement their agenda, with the Democrats holding the Senate and the White House, they decided to impose it by duress. They showed themselves to be absolutely willing to allow the country to default in the name of their continuing crusade for smaller government and increased inequality. They held the country to ransom and the President caved in to their demands.
The Budget Control Act 2011 (the legislation giving effect to the agreement made between the White House and Congressional leaders) authorises staggered increases in the debt limit. The price? First, there will be deep spending cuts, with no increase in revenue. Then a Congressional panel will make recommendations for further deficit reduction — and if these recommendations aren’t accepted, there will be more spending cuts. Throw in the requirement that both Houses of Congress vote on the heinous proposal to introduce a “balanced budget” amendment to the Constitution, along with a clearly delineated process whereby a Congressional “motion of disapproval” against an increase in the debt limit can be put forward, and you can see why Paul Krugman is shouting from the rooftops (and from his column in the New York Times) that this Bill constitutes abject surrender to Republican blackmail, and why Nancy Pelosi deemed it “a Satan sandwich with some Satan fries on the side”.
Obama’s greatest mistake, right from his inauguration, has been his desire for bipartisanship. In theory, bipartisanship sounds admirable. Government should seek to serve all its citizens, regardless of political hue. The ruling party should not seek to serve only those who voted for them. Indeed, the 1950s and 1960s represented a golden era of bipartisanship in America (excepting, of course, their respective policies regarding civil rights). Both parties accepted the legitimacy of the reforms effected by Roosevelt’s New Deal, and it was possible to say that there existed two reasonable parties competing as to who could best run the country.
Today, far-right extremism has consumed the GOP. As the clock ticked inexorably towards default and disaster over the past couple of weeks, it seemed that the President was hamstrung by being the coolest head in the room. Feeling as he must have that his primary responsibility to American people was to avert the potential catastrophe of a default, the White House ultimately agreed to a deal that very much represents a victory for Republicans.
We should have seen this coming.
Only last December, the raft of tax cuts for the wealthy introduced by President George W Bush were set to expire. The non-partisan Urban-Brookings Joint Tax Policy Centre had estimated that letting the Bush tax cuts expire for people with incomes over $200,000 would have been worth $140 billion per year, starting in 2012. The extra revenue generated could, for example, have covered all Disability Insurance payments (DI payments for 2011 are expected to total $131 billion). For the deficit hawks among you, it could have generated a $1.4 trillion reduction in the national debt over 10 years, two-thirds of the $2.1 trillion in debt reduction eventually agreed upon after the debt limit crisis, with the burden falling entirely upon those who could best afford it.
But the tax cuts were allowed to remain in place.
Throughout his presidency, Mr Obama continually insisted upon his opposition to the tax cuts. But in the run-up to Christmas 2010, the Republicans effectively held the working and middle classes hostage, by insisting that if the President allowed the Bush tax cuts to expire, they would refuse to authorise the continuance of tax credits which overwhelmingly benefited America’s working families. The President felt he had no choice but to allow the Bush tax cuts to continue. He said on December 7 last: “I’ve got an option of just holding fast to my position and, as a consequence, two million people may not be able to pay their bills and tens of millions of people who are struggling right now are suddenly going to see their paychecks smaller. Or alternatively, what I can do is I can say that I am going to stick to my position that those folks get relief, that people get help for unemployment insurance. And I will continue to fight before the American people to make the point that the Republican position is wrong.”
It is difficult not to feel sympathy for Mr Obama’s plight, in the face of relentless Republican obstructionism. It is notable, however, that as the GOP has seen its bullying tactics bear fruit, it has become increasingly emboldened. Take three prominent examples from Mr Obama’s presidency. First, the Patient Protection and Affordable Care Act (or “Obamacare” to some), the healthcare reform legislation which represented the key priority of Mr Obama’s first year in office, contained more than 200 amendments put forward by the Republicans, no doubt admitted at least in part in the spirit of bipartisanship. Ultimately, the legislation was narrowly passed by the House of Representatives and the Senate, without a single Republican vote in either House. Secondly, the Bush tax cuts were allowed to remain in place. Thirdly, just today, a routine increase in the debt limit has been tied to a wave of new spending cuts, as demanded by the GOP. Looking at each of these three incidents in turn, it’s fair to say that the Republicans have gone from impeding progress (in the case of healthcare reform), then to halting progress entirely and maintaining the status quo (in the retention of the Bush tax cuts) and now to aggressively pushing forward their own agenda, despite the fact that all but the most pedantic would agree that they don’t have the mandate to do so.
Progressives yearn for Obama to take a stand. He has said a number of times, when questioned as to why he doesn’t press the progressive cause, that his hands are tied, that there’s no point, because the House will vote his proposals down and the Senate will filibuster them. But surely, if Mr Obama wants to be a truly progressive president, he needs to restore both Houses to the position of dominance that existed immediately after his inauguration, when the Democrats had the House and a filibuster-proof majority in the Senate. Accordingly, if more people are to be persuaded to vote for progressive candidates next time they go to the polls, they need to be starkly aware of exactly what both parties represent. Caving in to GOP extortion and belatedly settling for the sixth or seventh choice option in a given set of circumstances might avoid short term crises, but all the American people will see is the stereotypical picture of Washington lurching from one crisis to another – “they’re all the same, they’re all dysfunctional, they never do anything for ordinary people” – a stereotype which plays beautifully into the hands of the GOP as it strives for smaller and smaller government.
But if the President truly believes in the politics of progressivism, he should champion those politics. Tell the people that the Republican Party denies the very legitimacy of the welfare state and is attempting to dismantle it. Tell the people that the wealthy are not taxed sufficiently. Tell the people that income inequality is at a level not seen since the start of the last century. The majority will vote in favour of such politics, because such politics favour the majority, not the wealthy minority. If he seeks to vindicate the interests of ordinary Americans, and Republicans in Congress votes him down, let it be on their heads. The American people need to see that the Democratic Party is indeed the party of progressivism, if indeed it is at all, rather than being meekly “less worse” than the Republicans.
So many people, me included, were inspired by Obama’s run for the White House because he put himself forward as a shining beacon of progressivism, a man who would transcend the Washington stereotype. All the more disappointing, then, when the stereotype which he sought to transcend seems to be consuming him.
