Note to Congress: Stop Screwing Around and Raise the Debt Ceiling

June 1st, 2011 at 9:34 am

Yesterday, the House voted for a clean debt limit increase.   If you’re one of those people worrying about the fragility of the economic recovery, or one of the many more actually struggling with it, this might have sounded promising to you.  In fact, a clean increase is the way to go.

Yes, we need to get on a sustainable budget path, and yes, that’s going to take some serious haggling between the parties.  Such haggling needs to occur, but it takes time, and the clock is ticking.

In the interest on not endangering an economy that really doesn’t need anything else to worry about, first raise the ceiling, then debate the budget.  What’s more important right now, gaining political leverage, or getting the economy back on track so people can get back to work?

It’s a rhetorical question.  This was not a vote about doing the right thing.  It was theater…you know, like Shakespearean tragedy.

As my CBPP colleague Jim Horney put it:

“House Republican leaders scheduled the clean debt limit increase vote for one reason:  to defeat it.  They believe this will support their strategy of holding a debt limit increase hostage to enactment of a deficit-reduction package they favor that would impose deep cuts in Medicare, Medicaid, and other important programs while protecting Bush-era tax cuts for the wealthiest taxpayers and various dubious tax breaks for large corporations and other special interests.”

The vote went down, big time.  Here’s Rep. Dave Camp, one of the leaders of the R’s strategy: “This vote, based on legislation I’ve introduced, will and must fail.”

Thanks, Dave.  One just doesn’t know what to say to that.  I fear we’re past the point where facts matter in this debate, but, sticking with Shakespeare, “once more unto the breach.”

I have lately been focusing on all the soft spots in the current economy, with particular focus on the labor market, since that’s where most working-age families are either going to start gaining some economic traction or continue slogging through a recovery that doesn’t look all that different from recession to too many families.

Anyone who wants to understand the stakes here should focus on the first graph from that link above—the sharp decline, and lack of recovery, in the share of the population employed.  Yes, GDP is growing again and we’re adding jobs, and that’s a sharp reversal from where we were.  But we’re not growing fast enough to generate enough jobs to meet the needs of working Americans, and creating more economic uncertainty by screwing around with the debt ceiling is a great way to ensure that we keep puttering along, at best.

One more thing.  These two trends of great concern to us right now—the loss of jobs and the increase in budget deficits—are intimately related.  Falling employment rates, or rising unemployment, are associated with larger budget deficits.  One begets the other as safety net programs and other measures to offset the contraction ramp up, and as tax revenues, whacked by the downturn, fall.

Here’s a picture of it:

We don’t have a tough economy because of current budget deficits.   To the contrary, our economy is markedly better off because public spending temporarily expanded to partially offset the massive private sector contraction.

Yes, there’s a structural—as opposed to cyclical—deficit problem underneath all this, but as this much-travelled CBPP graph shows, that’s much more a function of putting the wars and the Bush tax cuts on the credit card, along with the downturn itself.  The stuff designed to get the economy back on track—TARP and Recovery Act—are quickly fading into the sunset.  (Too quickly when it comes to stimulus, but that’s another issue.)

So stop blaming Obama and spending and the French and socialism and Keynes and the liberal media… and stop screwing around and get your act together and do the right thing.  Raise the debt limit and get back to work.

OK…I’m done.

 

Print Friendly, PDF & Email

10 comments in reply to "Note to Congress: Stop Screwing Around and Raise the Debt Ceiling"

  1. reflectionephemeral says:

    All of your post is obviously true, but the facts about how the Republican Party created the deficit with revenue reductions and deregulation are politically incorrect in the GOP (and pretty much in the MSM as well), so they won’t affect decisionmaking.

    What I don’t get is why anyone thinks there should be negotiating here. GOP leadership wants to raise the debt ceiling to ward off a catastrophic threat to our creditworthiness. Democratic Congressional leadership wants to raise the debt ceiling to ward off a catastrophic threat to our creditworthiness. The executive wants to raise the debt ceiling to ward off a catastrophic threat to our creditworthiness.

    So what is there to negotiate about? Do the thing that makes the catastrophe not happen.


    • WASanford says:

      I agree with you! No negoations! A default will hurt the Republican constituency the most. On top of that, I don’t think Boehner has enough backbone to follow up on his threat.

      All money bills have to originate in the House. The house has the responsibilty to pass a bill that will make it through the Senate and be signed by the president. Anything short of that and the Republicans will have destroyed their own credibility. That will leave the Democrats looking good in 2012. But, is it worth it?


  2. foosion says:

    I’m old enough to remember when the GOP claimed uncertainty was hurting the economy. Apparently uncertainty over whether the government will be forced into default doesn’t count.

    In 1979 the US was late with some payments due to technical processing issues. This resulted in treasury rates going up by about 60bp for many months. Apply that to our current debt and you find the cost of the a default caused by the GOPs tactics could be many billions of dollars.

    We long ago left the realm where facts matter. The GOP realizes that a weak economy hurts Democrat’s election chances (good for the GOP) and holds down employment and wages (good for their corporate backers and therefore good for the GOP). Why anyone expects them to do something positive for the economy at this point is beyond me.


    • Bill Plat says:

      Can you tell me who has spent more money than all of the other presidents put together? Let’s see could it be Obama aka Zero. Well I do believe it is. Who said Fannie Mae and Freddie Mac were good to go right before they belled up? My goodness was that one of your Democrats, Barney Franks. Who was it that collected millions from Fannie Mae and Freddie Mac by pushing through any loan that come down the pike? Now could that have been, don’t tell me, oh I know Franklin Rains another Democrat. Who had the great idea to lend tons of money to low income individuals to where they could buy a home they knew they could not afford. Darn there are the Democrats again. Who thinks we can for ever run a welfare state. Oh me I bet it is the Democrats.
      Bottom line the Democrats have screwed this economy so make no mistake about that. And if you think they have a clue on how to fix this mess then you are living in a dream world.


  3. D Furlano says:

    Another great blog to read.

    We need more like this.

    Thanks

    Dan


  4. The Raven says:

    Kraw. If only. Our leaders seem hell-bent on repeating all the mistakes of the Great Depression, and inventing some new ones as well.


  5. WASanford says:

    There is a great chart on Wikipedia at: http://en.wikipedia.org/wiki/File:US_Federal_Debt_as_Percent_of_GDP_by_President.jpg It shows the federal deficit as a percentage of our Gross Domestic Product. That percentage steadily fell from a high of about 121% at the end of WWII to a low of around 38% by the end of the Carter Administration through both Republican and Democratic administrations. The sudden uptick at the beginning of the Reagan Administration is steep and continued during his eight years in office and continued its climb during Bush I. It dropped again during the Clinton years then resumed its upward climb during Bush II, steepening its climb until the end of Bush II. There is a continuation of this steep line in the first year of Obama’s administration, possibly reflecting the attempt to stimulate our economy.
    What are the modern Republicans doing that causes the debt to swallow up more of our GDP? And what are the Democrats doing that lessens it?


  6. Paul J says:

    Good chart. I went to the original article because I couldn’t figure out why it showed the economic downturn having an effect for 10 years. Mostly extra interest expenses.

    I’m looking for a chart showing budget deficit from 2008 onwards that would show that most of the increase in the deficit is due to falling revenue (put the Stimulus tax cuts into that line), increased jobless benefits, increased medicare, that shows that the deficit is NOT due to Obama spending like a drunken sailor, as the GOP likes to say. Definitely NOT increased govt. Anyone have one handy, or do I have to make it myself?


Leave a Reply

Your email address will not be published.