Not a Primer for the Debt Ceiling

For two years Glenn Beck held court at 5pm, methodically detailing the activities of a cohort of Americans – and their foreign supporters – who were committed to a “fundamental transformation” of America.

Among their helpful goals were the overthrow of the US government and the collapse of the American economy.

Beck’s analysis was all the more frightening because of the connections between these radicals and the machinery that made Barack Obama president.

So it is hard to overstate the sense of ironic astonishment that these activists – Van Jones, Bill Ayres, Bernadine Dorn, Richard Trumpka and Andy Stern, among others – must feel as they watch the Majority Leader of the Republican Party so apparently dedicated to carrying their water in the debt ceiling talks, while President Obama presses for a deal.

Leader Cantor begins from a principled, common sense position on the debt.

The US has a spending problem, not a tax problem.

The US debt is spiraling out of control and it appears that only crisis situations serve to motivate lawmakers to make real and binding changes to US fiscal policy.

Cantor speaks for the 87 Members of the Frosh-10, the conservative Republicans who won last year based on a promise to bring federal spending under control, and other fiscal conservatives, who have drawn a bright line on any revenue increases to solve the debt problem.

But in pursuing the principled objective of binding spending cuts to restore American fiscal credibility, Cantor’s uncompromising rigidity is leading the Republican majority to the edge of the abyss.

Since the beginning of the new Congress, the debt ceiling deadline has been a tool to gain leverage on the President and Democrats to make meaningful cuts in spending. But there appeared to be a consensus understanding, across parties, that the actual debt ceiling rise was a non-negotiable requirement, lest the specter of default create a catastrophic cascade through financial markets and the economy.

But that is not how the negotiations have worked out in practice as the deadline looms. There are clearly a block of Republicans in the House who see default as a viable option to force spending cuts, and their advocate is Cantor. It has so far led to frustrating results.

A grand bargain to reform entitlements and cut spending – but which would also raise revenue?

NO.

Cut spending, but not on a dollar for dollar basis with an increase in the debt ceiling?

NO.

And with time running out, what about a politically creative attempt by Mitch McConnell to put the onus of raising the debt ceiling on the President, without a hard enforcement mechanism for spending cuts?

NO.

All Cantor will offer is a smaller deal, based on the cuts agreed to in talks with the Vice President to raise the debt ceiling on a dollar for dollar basis.

For his part, President Obama has said no to this,  because another debt ceiling debate would be required in the middle of an election year, and also because of his insistence on raising revenues as part of any deal.

With the clock ticking down, this is the point where a political reality check would be useful.

Democrats control the presidency and the Senate.

Republicans do not even have the numbers to overturn a presidential veto in the House of Representatives. It is an exceptionally weak position from which to be laying down diktats.

But in the debate until now, the Republicans have been remarkably successful.  If you consider that the President’s original position was a clean debt ceiling bill with no riders, to have Democrats agreeing in principle to between $1-2 trillion in spending cuts is a tectonic shift.

But the GOP won’t pocket its gains and cut a deal. While potent tools to curb spending remain through the annual appropriations process – and the threat there to shut down the government – Cantor and his ilk have imprudently dug in as if all the family business needs to be settled before August 2.

Speaking plainly, Cantor and crowd are overplaying their hand.

By rejecting every proposed solution that does not meet their specific demands, they promote default as the only viable option.

Shockingly, some Members dont’ see this as a problem.

According to the Washington Post, freshman Representative Rick Crawford (R-AK), is fine with the a default, which would force Treasury to use all income tax revenue exclusively to meet interest calls, while leaving wide swaths of the federal government un-funded, like the FBI, TSA and Homeland Security. Lets not even talk about Social Security and the soldiers risking their lives in Afghanistan.

Another freshman, Mo Brooks (R-Ala) echoed the view by several Republicans who don’t believe predictions of economic calamity as a result of failing to raise the debt ceiling.

This uninformed position flies in the face of every economic judgement from people who are actually paid to know what they are talking about.

S&P and Moodys are both threatening to lower America’s gold standard AAA bond rating if the debt ceiling isn’t raised. That shock – a first in 70 years – would have immediate impact on interest rates and the place of the dollar as the reserve currency, not to mention the roiling international finance markets.

Fed Chief Ben Bernacke, Treasury Secretary Tim Geithner and even the Chinese – America’s largest foreign creditor – have stepped up to warn against the cataclysm that will occur if the debt ceiling isn’t raised.

Cantor’s refusal to accept the political reality and the economic consequences of this reckless path will also have a destructive impact Republican fortunes.

Right now, it’s Barack Obama’s economy.

Historically high unemployment, anemic growth, rising inflation, deep debt. George W. Bush is not responsible for the actions President Obama has taken in the last three years.

Obamanomics got us to where we are.

But that argument will vanish in an instant if the debt ceiling isn’t raised.

Republicans will become willing co-conspirators with Obama for anything that comes from the failure to raise the debt ceiling; market uncertainty, a stock market dive, increased interest rates, a lending freeze, a run on the dollar, new unemployment and an offical double dip recession, worse than 2008.

And the President will occupy the high ground through this unexpected gift by blaming the GOP for pro-actively forcing a default that brought on the new economic misery.

Mitch McConnell has it right.

There can be no realistic grand deal on spending until a Republican is in the White House.  The ideological chasm is just too wide.

McConnell’s innovative solution to solve the debt issue in the interim provides a legislative vehicle that forces the President to take responsibility for debt ceiling increases through 2012.

Will Republicans get massive cuts now?

NO.

Will Republicans save our nation’s credit rating while forcing Democrats to justify their spending priorities through 2012?

YES.

For the Frosh-87  and Leader Cantor – Rome wasn’t built in a day, and decades of overspending will not be corrected in one vote.

A promise to reign in spending on the campaign trail is not a blood oath to fix the problem in one term. Progress is the key and Republicans demonstrate that without commiting national economic suicide.

Be responsible now, and the Congress that takes charge in 2013 can fix America’s financials for good.

The alternative is to associate yourselves with the likes of Bill Ayers and those who would galdly see the collapse of the American economy.

This shouldn’t even be a choice.