Commenting on the US debt ceiling debate Vince Cable has described the US Republicans as behaving like "right-wing nutters". Ryan Streeter of ConservativeHomeUSA explains why John Boehner and other Republicans have decided to play hardball with the high-spending President Obama.
The debate raging in Washington over America’s debt ceiling has generated a flurry of competing claims about America’s fiscal condition and what to do about it. The debate is as thick as the swampy summer air of America’s capital city.
In reality, though, the main terms of the debate – and what is at stake – are pretty straightforward.
The United States has a statutory cap on its public debt, currently at about $14 trillion. The debt ceiling can only be raised by passing a new law. This has been done multiple times over the past few decades with little fanfare. But this time Republicans are using the vote to try and force the White House to be more fiscally responsible. Sajid Javid MP has advocated a ceiling for UK debt so a cap is also put on the ability of British politicians to secretly borrow more and more.
Three factors explain why the ceiling debate is happening now:
- America’s economy is also about $14 trillion. So we’re talking about raising our debt ceiling in excess of our combined GDP, something we haven’t done since World War II.
- Our deficit has spiked $4 trillion since Obama took office, but more importantly, new obligations in his health care law and other spending will accelerate the rate of deficit growth over the next decade beyond anything we’ve ever seen.
- We have $61 trillion in unfunded future obligations, mainly because of our health and pension promises to America’s seniors. With the baby boom generation starting to retire, these programs will crush our economy without reform.
It is for these reasons that House Republicans have insisted that any increase in the debt ceiling be accompanied by long-term spending cuts (namely, those that fix our growing health and pension programs) so we can reassure markets and keep America fiscally sound. They passed a bill last week that would cut $6 trillion in spending over the next decade in exchange for a $2.7 trillion increase in the debt ceiling.
To date, it’s the only plan on paper with any substantial details. The Senate rejected it – no surprise.
President Obama has never put forward a detailed plan. His budget earlier this year, which even Senate Democrats rejected, ignored the debt. And in the debt ceiling talks, he has only been willing to agree to larger spending cuts if Republicans would agree to substantial tax increases. His arguments on taxes are rooted in “fairness” rhetoric rather than on any viable analysis of what will make America fiscally sound.
Republicans have been clear they will not agree to any tax increases since America’s problem is overly indulgent spending, not a shortage of revenue.
This has forced the Senate Democrats to put forward a new bill that would cut spending by $2.7 trillion over ten years and raise the debt ceiling by roughly the same amount…with no tax increases. That’s a testament to how forcefully Republicans have shaped the debate. But the details on the cuts are vague.
Republicans are leery of vague commitments to cut spending, since in the past, Congress has always found ways to restore spending in subsequent years. And they are aware that Reid’s proposal is, mysteriously enough, just enough to get America past the 2012 presidential election.
For this reason, Speaker John Boehner is trying to get House Republicans to approve a plan that would cap spending next year by specific amounts and only raise the debt ceiling enough to get us into next year. This would force Obama to request another increase in an election year and make his spending record an issue going into the 2012 election.
Most House Republicans are not happy with lower level of cuts in Boehner’s plan, and they don’t believe Reid’s plan will ever result in the cuts it promises.
Given the gridlock (designed as it is into the U.S. Constitution), some version of Boehner’s plan will likely be the end result as Congress seeks to avoid default. Which means we’ll have some spending restraint, no new taxes, and a guarantee that the debate will continue next year.
This is not at all ideal, and it could lead to a downgrade, but until America is ready for serious reform, it is where we are.
Ryan Streeter is Editor of ConHomeUSA.