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Playing partisan politics with debt
Robert Reich
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Kai Ryssdal: All was basically quiet on the debt limit front today. Not too much political back and forth over how to manage the national finances. That'll surely change in the weeks to come. We'll be desperate for a break from the politics of government economics.
But in the meantime, commentator Robert Reich wonders why the debate's political in the first place.
Robert Reich: As the government approaches its borrowing limit of $14.3 trillion, Republican and Democratic leaders are jockeying for political advantage over what conditions should be attached to raising that limit.
This is insane. Raising the debt limit should not be subject to party politics.
It's bad enough government shutdowns have become an accepted part of political negotiation. But failure to increase the amount the Treasury can borrow would have far graver results. Not only would the government be unable to issue Social Security or Medicare checks, but the United States couldn't pay interest on its current debt.
We'd go into default. The full faith and credit of the United States would be in jeopardy. Treasury bonds would go into free fall. Interest rates would skyrocket. We, and most of the rest of the world, would fall into financial chaos.
The recovery is still fragile. All this would force us and most of the rest of the world into a deep recession or worse.
No one in their right mind would threaten this, and yet it's talked about as if it's just another aspect of Washington politics that may happen in early July when the Treasury runs out of ways to keep paying our debts.
In fact, it's a giant game of highway chicken, and if one driver doesn't yield, the crash will be catastrophic.
Games of chicken are won by drivers able to convince their opponents they won't swerve. That gives a strategic advantage to Republicans backed by the so-called Tea Party, who are so convinced government is evil they've signaled they'd be willing to risk it all.
But this shouldn't be a matter of political strategy. Disagreement about the nation's budget should be worked out through the constitutional process of majority votes in Congress, followed by the president's signature or veto, and Congress's right to override the veto.
No group of legislators is entitled to threaten to crash the United States economy if its demands aren't met.
Where are the leaders of Wall Street? Where are the corporate statesmen? They all have as much, if not more, to lose as anyone. They should insist this game of chicken be called off.
Ryssdal: Robert Reich was Secretary of Labor for President Clinton. His most recent book is called, "Aftershock: The Next Economy and America's Future." David Frum is up in the rotation next week. Send us your comments sometime before that, please -- click on this contact link.
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Ordinarily I would say thank God I live in Canada. But the true fact is that we are shackled to America
by way of trade. So, please get your act together and stop the foolish games of partisan politics and make things better. For all of us.
Ordinarily I would say thank God I live in Canada. But the true fact is that we are shackled to America
by way of trade. So, please get your act together and stop the foolish games of partisan politics and make things better. For all of us.
Interestingly, Prof. Reich's own University of California has its own monumental case study failure to practice what it is supposed to be teaching:
"UC plans to cut administrative waste by $500 million"
http://www.sacbee.com/2010/05/20/2763606/uc-plans-to-cut-administrative....
Maybe Prof. Reich can demonstrate his expertise by leading his own university in setting an example for Congress, the California legislature and most California cities on how to fix their budget problems by eliminating waste and leadership failures, and make it possible for qualified California students to afford UC once again as their highest priority.
UC deserves great credit for its role in making California the greatest state in America after WWII, but UC must also hold itself accountable for California failures in the 21st century.
A government is not an indivual who sells bonds. Debt will increase even if we stop spending now. Mr. Reich has it 100% correct, raise the debt limit, then raise taxes where they belong, and then get spending under control. It has to be done slowly, but surely. Rushing this will just bring on more bad economic news.
Regardless of whether you agree with Prof. Reich's political philosophy or not, the #1 fact of life that dominates Congress is that special (republican) interests find it all too easy to control congress by creating chaos politically, economically and socially. The republicans take advantage of it and the democrats are hopeless in dealing with it.
That's why the first two years with democratic majorities in both houses, even when the Obama administration may have had some success, many successes have been far too easily trashed by the chaos produced by special interest rhetoric of anger and mendacity that controls far too many people who never bother to think about the fact that the consequences will do them great harm.
The worst consequence is that America's middle class is disappearing while enriching the special interests beyond their most demonic dreams, while America's poverty is class is headed toward being the American majority by 2050.
This is rich. Robert Reich lectures us that it's "insane" for the U.S. to stop borrowing more in order to pay interest on its already out-of-control debts.
If he were to give this advice to an American family in over their heads in debt (as the U.S. is), who would be considered "insane?"
The first rule of getting out of a hole is to stop digging. This guy is supposed to be one of our most brilliant liberal minds? I guess so.
We've known the debt limit is coming for years. Yet, in stead of actually balancing the budget and controlling spending to live within our means, we spend even more money than we can ever repay. In some madman's attempt to dig his way out of the hole by digging straight down.
20% of the real federal tax intake is going to be used to service just the debt interest payments. Liberal big spenders would die to have a 20% increase in taxes on the rich. Yet, they support strangling the country with even more debt payments.
Your exchanging an absolute certainty of a collapse of the US dollar, to give money to anyone that will vote your way. Personally, I think the only thing that can save the country now, is to cut off the lending flood, and make the federal government go cold turkey. A lot of pain now, maybe we stop a civil war tomorrow. There's a lot worse things than our country being forced to live within it's means.
You do understand how the breakdown of a great society results in massive suffering and death? It's happened before, it will happen again.
I just don’t understand. If the problem is out-of-control spending, as President Obama’s own deficit reduction panel concluded, then how does more and more borrowing solve the problem? Standard and Poore’s just adjusted the ratings for US bonds indicating that the probability of default is higher now due to the extraordinary level of debt the country is already carrying. Please explain why our creditors will suddenly become nervous unless we expand the debt limits yet again.
If the debt limit is not expanded there will continue to be billions of dollars of taxpayer revenue pouring in. We will have to make painful choices about how to prioritize spending, but servicing the federal debt would certainly be the top priority and there would not be a bond default.
Perhaps it is more likely that if the debt limit is not expanded, then investors will reason that we are finally facing up to reality and restoring some fiscal sanity. Instead of the doomsday scenario painted by Mr. Reich, perhaps S&P will restore the country’s excellent ratings and economic growth will actually be promoted.
If you really believe Mr. Reich’s premise, that if the debt limit is not raised we will not be able to service the debt we have, then you would need to conclude that the only way to pay the debt is by borrowing. If we are in so deep that we must borrow to pay the interest on our previous borrowing – then a default is absolutely inevitable! If a default is inevitable then the pain will be greater the longer we put it off. I do not believe the only way we can pay the interest on our current debt is to borrow yet more and more.
If Mr. Reich can explain to this simple-minded taxpayer how the solution to our out-of-control borrowing is to expand the level of borrowing, then I will begin to believe that Mr. Reich is not merely playing the politics of fear mongering.
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