Raising the Debt Ceiling to Avoid Default: the Harvest of Gullibility

First of all, let me repeat the quote which I asked you to identify the source of in my last posting.  Here it is:

"The full consequences of a default -- or even the serious prospect of default -- by the United States are impossible to predict and awesome to contemplate. Denigration of the full faith and credit of the United States would have substantial effects on the domestic financial markets and the value of the dollar."

This is a statement made by Ronald Reagan in 1983, one of the many occasions on which our Presidents have commented on this question.  This illustrates how far to the right of Reagan the Republican Party has strayed.  The next time they invoke “Reaganomics” or try to associate themselves with “The Great Communicator,” they should try to remember his views on the subject.

Bottom Line:  In order to raise the debt ceiling, some changes will have to be made to create the semblance of funding an increase in the ceiling.  It just can’t be done, as the Republican leader in the Senate, Mitch McConnell, has suggested by just letting the President do it unilaterally, without any mandated funding whatsoever to back up the increase in the ceiling. 

The Democrats, dragged along by the scruff of their necks by President Obama, are willing to compromise to the extent of going along with spending cuts which touch upon entitlement programs such as Social Security and Medicare.  But this alone will not do the job without wreaking havoc in this nation and therefore, the Democrats and the President will not go that far.  They insist that there must be a measure of revenue increases as well, and that is the rub. 

The Democrats are willing to fund the raising of the debt ceiling by accompanying every three dollars of spending cuts with one dollar of revenue increases. The Republicans in the House are insistent on allowing no tax increases whatsoever, even if they just are accomplished by closing loopholes, and even if they occur only in the highest income brackets.  Tax rates are lower now than they have been since the 1950s and yet the Republicans tenaciously refuse to compromise on this issue.

One of the great mysteries of this era is how an entire major political party, the G.O.P., and about half of the American population have been hijacked into believing that keeping taxes as low as possible for the wealthy will benefit the entire economy by encouraging investment.  This never happens.  All that occurs is that the rich get richer. Little “trickles down.” Jobs are not created, at least in this country anyway.  Justifying this anti-tax mania is the conviction that our government is no more than a necessary evil, to be diminished as much as possible and a failure to recognize the necessity of its providing those services which are not profitable enough for the private sector to provide, to regulate commerce and to look after the welfare of the People.  We are reaping the harvest of this gullibility. 

We are also watching the demise of the Republican Party as it self-destructs into (1) a Grover Norquist inspired neo-anarchist extreme right wing and (2) a traditionally responsible conservative wing which would be something more than the “tool of the rich” into which the present G.O.P. is morphing ... with its “eyes (to borrow from the title of the 1999 Kubrick movie) wide shut.”

What will happen?  My guess is that the Republicans in the House will stand fast and refuse to raise taxes, the President will agree to some mostly cosmetic spending cuts of about two trillion dollars which will not affect present entitlements but which will satisfy the Republicans, and the debt ceiling will be raised, increasing the severity of the problem.  This will happen again a year from now, postponing a real solution until after the 2012 elections.  At that time, I foresee new Democratic super-majorities in both the House and Senate which will allow the repeal of the Bush tax cuts and the end of the free ride, tax-wise, that the wealthy have been getting.  There will be a Keynesian solution (wide tax-supported government stimulus at all levels) to our economic crisis, but with safeguards to prevent this from leading to any diminishing of our liberties.  


                                                         

If, however, the Republicans manage to lie their way to victory in 2012, as they did in 2010, the United States will not only go down the tube, but the G.O.P. will repeatedly keep pressing down on the flush lever.    

Jack Lippman

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