Today in Washington President Obama is meeting with congressional leaders to deal with the need to increase the debt ceiling and keep the country in business.
The debt ceiling has been raised many times over decades past, under presidents of both parties by Congresses controlled by both parties, because Congress almost always spends more than the country takes in from taxes so the national debt keeps rising. The last budget surplus came under President Bill Clinton and was created because the boom years of the ’90s sent a torrent of tax revenues into the treasury.
The eight George Bush years were all deficit years, with the shortfall made worse by the largest tax cut in history. But the last three budget years have been disastrous. The recession put tax revenues into free fall. Spending rose dramatically to stimulate the economy. Record deficits resulted and quickly pushed the national debt above the ceiling Congress set the last time.
Unless the ceiling is raised by Aug. 2, the federal government will be unable to borrow more money and will be out of business. Fiscal chaos will result.
Congress has never let this happen; it shouldn’t let it happen this time. But there is a very real possibility that Congress will cut off Uncle Sam without a penny rather than give an ideological inch.
Why? Because, as President Obama said last week, “this is more than a fiscal question, it’s also a values question.”
The Republicans say they won’t raise the debt ceiling if they must agree to any measure that produces more federal income. Democrats are equally determined to see some tax breaks for wealthy individuals and profitable corporations repealed and taxes on “millionaires and billionaires” restored to 2000 levels.
What does the president mean when he says it’s “a values question?” As a specific example: quite a few hedge fund managers have annual incomes of $1 million or several times that. They get to keep a lot of that because their profits are taxed at the capital gains rate — 15 percent — instead of as ordinary income. Changing the law to tax those guys at the same rate that the rest of us pay is one of the income-producing reforms proposed. But that change would be “a tax increase” and would therefore be opposed by Republicans.
A better example, because so much more money is involved, is the proposal to allow the tax breaks given to high earners in 2001 and 2003 to expire and tax those at the very top of the income scale at the same rate they paid for many, many years before that.
Restoring those higher taxes on the nation’s wealthy would bring in billions in additional revenue and make a real difference in bringing the deficit down.
Republicans reject this argument as an unacceptable tax increase and demand higher cuts in spending as an alternative. Those spending cuts would, of course, come from government programs that benefit lower and middle income groups and, needless to say, would put thousands more government employees out of work.
That’s where the “values” question arises: What should government do? Raise taxes on the wealthy or cut Medicaid, Social Security, the Pentagon, Medicare, farm subsidies — or name your own federal spending target?
The anti-tax crowd has no problem with this choice: Anything is better than raising taxes, they say — and then pick up their marbles and stomp off the stage.
If they don’t come back in a more rational mood before that August deadline, the damage done could toss the economy back into deep recession. July will be an interesting month.
— Emerson Lynn, jr.
