Debt Ceiling Madness

In the White House and Capitol Hill, as well as all the corporate media airwaves, the number one issue today is the Debt Ceiling and whether or not Congress and the President are going to come to some sort of deal on "deficit reduction" in order to raise it. I will explain why I put "deficit reduction" in quotes a little later, but first let's be absolutely clear: the US can and will only ever be able default on its debt obligations if it wants to. Thus, only if the US has the political will to default can it There is no obligation for us to default, evidence by the fact that we are still able to borrow money at a very low interest rate. So what is the obstacle?

The Republican Party.

It is the GOP who is holding the American economy hostage by threatening to have the will to lead the US into default unless it's demands are met. In fact, there are around 60 House Republicans who don't even believe raising the Debt Ceiling is a good idea, much less imperative. Of course, that is a problem with ideology; the rest of the GOP Congressmen and women do know that a default would have catastrophic consequences, yet they are continuing this course of action of no compromise. I can't help but think of the frustrating irony when I hear Speaker Boehner talk at his various press conferences of the necessity to raise the Debt Ceiling and all the terrible implications resulting in a failure to do so, as if he doesn't hold the key. Indeed, this should not even be a political matter if we really have two parties looking out for the good and the will of the American people, which, by a majority, support the President's side of the battle. Again, there is a frustrating irony in recalling that after a barrage of propaganda and false information from the GOP and its constituent moneyed interests during the health care debacle, popular opinion was swayed against the President's health care reform bill, a fact that the GOP used to great ends in rhetoric in opposition to the bill. But now, when the public, by a large majority, supports raising taxes on millionaires and billionaires, they ignore it. The same with the public's whopping 7% of belief that the debt and deficit should be a priority.

The point is, of course, is that Republicans don't really have the interests of the American people at heart, as wouldn't anyone who would push for a default of the American economy. The result of such a default would make the markets plunge, interest rates sky rocket, inflation balloon, and much more. Indeed, we don't actually have a short term debt crisis at the moment, contrary to popular perception, but the Republicans could create one by not raising the debt ceiling. Maybe then they would have a real justification for their economically destructive support for austerity.

And what of this current debacle over austerity, or as we call it here in America, "deficit reduction?" It's, of course, a complete farce. I put the words deficit and reduction in quotes because there is no way the right actually wants real deficit reduction, especially when reflecting on the fact that they fought to keep the Bush Tax Cuts in place, fought against health care reform (as the long term debt and deficit crisis is at heart a health care cost crisis), and won't budge on cutting military spending. And this is just what they've done under Obama's tenure, I will be soft on them and not even go into the fact that it is Republicans who incurred more debt then Democrats in the last 30-40 years. Nor will I go into the fact that the only two times in that period we ever had a budget surplus was under Democratic administration. Let's not forget about fiscal conservatism poster boy Reagan's deficits, either. Regardless of those small, insignificant pages of the the history book, we can just focus on the here and now and see the hypocrisy of the GOP's narrative; they want to cut on programs that they don't like, and spend on programs that they do. Programs they don't like being programs for the middle and working class, programs for the elderly and disabled, insurance for the unemployed, etc., and programs they do like being tax cuts for the rich (which is a form of spending, let us not forget), subsidies for big industries such as oil and agriculture, and military spending/war-making.

The ultimate fact is that we should not even be thinking about cutting federal spending on programs such as Social Security, Medicare, Medicaid, Unemployment Insurance, Food Stamps, and the like because cutting such measures will slow our economy down further, which is something we should trying to avoid at all costs in our currently depressed economy. If we don't have enough revenue to continue these programs or expand them to include the growing need, we should gain more revenue by increasing taxes on those who can afford it the most: the rich and corporations, many of which benefited from the financial meltdown that hurt the rest of middle and working class. The only way to recover from a deeply depressed economy such as the current one is to grow our way out of it; by keeping taxes unfairly low on the rich and corporations(who, by the way, would rather hire your counterpart in China) we are starving such programs that keep money in those in needs' pocket, thus deteriorating demand even further.

And, of course, anyone who knows anything about the current state of our economy knows that the problem is the lack of demand; ask any business owner what their major roadblock to making a good profit is and they will tell you it is the lack of demand. Small business lobbyists are fighting against any raising of taxes on the rich because many small businesses file personal income taxes, which put them squarely in the same tax bracket as the rich. But, as pointed out, they are voting against their interests, so to speak. By keeping taxes unfairly low, you are deteriorating demand. If you, say, raise taxes on the rich, you will increase revenue for such welfare measures as unemployment insurance, thus keeping money in the unemployed consumer's pocket, who will then buy more products and hire more services, thus stimulating demand. This stimulation of demand will help the small business owner's bottom line more than any tax cut, which will end up hurting more than helping, in any case. If a small business has a better bottom line, that will allow them to grow, and thus hire. This is how recovery happens. This is how, along with large scale federal investment in direct job creation, from 1933 to 1937, FDR slashed unemployment from 25% to 14% until forces from the right pressured him to make an effort to balance the budget by slashing New Deal spending and raising taxes on the working people, thus creating a double dip depression.

And what of corporate taxes and subsidies? The Republicans have been firm on this end as well, and in fact, want to lower such rates because they claim rates are too high and cannot compete with other countries. Which is only half true, at the most. Yes, our corporate tax rates are higher than many other countries, but when you account for all the loopholes, tax credits, and subsidies, they actually come out to much lower. How else do you think GE was able to not pay ANY taxes last year? The simple fact is, the Conservative theory on corporate tax cuts is wrong and destructive. They claim that if you cut taxes on corporations, they will have more money that they will then use to hire more people. What we've seen thus far since the financial collapse goes directly contrary to this, where corporations are making record profits and sitting on record amounts of cash, all whilst they are paying hardly any taxes. So where are the jobs? One word: "Globalization." Corporations are not hiring as much as they supposedly should be, and when they do, they are hiring off in China and Indonesia. Trickle-Down economics has been proven wrong over and over again, as the rich have always been more likely to save money then spend, but now in a "Globalized" world, such a theory holds even less truth, as any investing occurring will most likely be occurring in countries with cheaper labor. We won't even go into the devastating effects this has on the inhabitants of such countries.

On the other hand, if you raise taxes on corporations, you can create more revenue, thus strengthening our social safety net, thus staving off the deterioration of demand, thus ultimately saving jobs. And if there is political will, which, sensibly, there should be, for the government to provide real stimulus and investment into the economy a la The New Deal, there will be the means to do so, thus creating jobs.

I am not saying we don't have a long-term debt crisis, because we do 10 years down the road, and it is serious. But we do not have a short term one, and any measures taken right now to address such an imaginary issue in any other way than serious investment into growth (which, by itself, will be the single greatest solution to our long term fiscal problem, other than lowering health care costs) would seriously hinder our economic recovery, which is already moving at an incredibly slow rate because of the continuation of the same Bush economic policy that resulted in a net loss of jobs during Bush's tenure. No cutting of federal spending on the social safety net should be implemented until 2014, at least. If there is still worry about the short term fiscal situation, which is really just invention of GOP, another Bogeyman so to speak, then there are some things we can safely cut without hindering our economy too seriously; those are the three ongoing military operations we have in Afghanistan, Iraq, and Libya, the various, expensive military bases we have sitting, wastefully I might add, all around the globe, subsidies for big oil, coal, and natural gas, and the military aid we provide to countries such as Israel and Columbia.