Debt Ceiling – The Debt Ceiling is on every ones mind these days. This is the fiscal limit set by congress going back to 1917 to control government spending. Much is at stake if the debt ceiling crisis isn’t handled properly. The United States stands to lose it’s credit rating in the world economy. We jeopardize having our Stock and Bond markets crash. Treasury Secretary, Timothy Geithner has his job cut out for him.
The overriding factor that will determine what happens with the debt ceiling is politics. In this game of fiscal chicken, the Republicans are steadfast and resolute that they will not be the ones to blink. No one wants to be the first one on the GOP side to support raising the debt ceiling. To do so, would brand that person a fiscal spendthrift.
Sadly, each side is jockeying for political gain that could translate into positive results in the upcoming 2012 election. There is much speculation that the Republicans are purposely stonewalling any resolution over the debt ceiling as to make political hay come the 2012 elections.
The Republicans rode into the house on a political tidal wave that was seen as a referendum on Pres. Obama. They [Republicans] promised jobs and a focus on the domestic economy. The GOP has sat idle and has not made any substantive effort to address the promises they made in the 2010 mid-term elections.
During each election cycle, half the electorate votes Democrat and the other half votes Republican. It’s easy to see why the 2% moneyed elite vote Republican. It’s not so easy to see why the other 48% do? These are for the most part middle-class, and blue collar workers. They inevitably vote against their own interests because they have been told that Pres Obama is the cause of the problem.
The Republicans during the midterm elections, promised jobs, so the question is, where are the jobs? This appears to be merely a ruse to gain control of the House. As much as the Republicans love to crow about how they help America and vilify the Democrats, let’s take a look at the last Democratic president.
During the two terms that Bill Clinton was in office, he did a lot of good for the country. Under the Clinton administration the United States enjoyed the longest boom in United States history. He left office with a $4 trillion budget surplus, he established trade deals with China and NAFTA. The US economy expanded 50%, the United States gross national product was 10 Trillion dollars, which was 25% of world economic output, unemployment was at 4% which was a 40 year low at the time, the economy created 15 million jobs, and the stock market grew three times creating thousands of millionaires.
President Clinton did leave some baggage as he left office. There was a controversial welfare reform act which hurt poor people who were at the bottom of the social ladder. There was no long-term reform of Social Security or Medicare during the Clinton boom. Bill Clinton came up with the motto save Social Security first. However, under his administration there was no substantive reform of the entitlement program that protects our senior citizens.
The media is in a hoopla over the debt ceiling debate. Why does the debt ceiling matter? the politics surrounding the debt ceiling goes like this, does the United States pay its bills or not? Here’s the conundrum that keeps the Republicans from working with Pres. Obama. If anyone on the Republican side votes to raise the debt ceiling he or she will be seen as a fiscal spendthrift. That’s not what you would want to happen if you’re a Republican. There is much speculation that the Republicans intentionally want to drive the American economy near the edge of the abyss to make political hay in the 2012 elections.
The debt ceiling was instituted by Congress in 1917, in theory it helps Congress control spending. There are many who criticize Treasury Secretary, Timothy Geithner for his Keynesian economic theories. This is the macro economic theory of a mixed economy between the private sector and governments role in aiding markets and the economy. We saw Keynesian economics in play when the government bailed out the banks and Wall Street; however, they forgot Main Street.
What happens if the government doesn’t raise the debt limit? At a minimum a default could hurt US bonds, the dollar and investors portfolios. The US bond and stock markets would crash. Timothy Geithner is coming up short by $118 billion per month, as he tries to move money around in order to prolong raising the debt limit. If Congress decides to cut spending by that amount, it could signal a partial government shutdown
A big part of the debate surrounding the debt ceiling is that the most wealthiest Americans, and American corporations who do business offshore are not paying their fair share of taxes. it’s estimated, that large American corporations have generated 1.4 Trillion dollars in profits earned. Not one penny is paid in federal taxes to the US government. In the meantime the American middle class is being eviscerated by lack of jobs, attacking unions and government employees. These are institutions that created the middle class and made America the greatest country in the world.
During the Clinton years tax rates were higher for the richest Americans. Under Pres. George Bush, there were substantial tax cuts on the wealthy in the United States. Politically, the Republicans don’t want to go down that road. Even Warren Buffett, the world’s richest man, has stated that a slight increase on the wealthiest Americans, would not be felt by the richest among us. Let’s hope that the Republicans will put Americans first, and not any anticipated political gains they anticipate in the 2012 election.
Let’s put it another way. If the Republicans were to actually work with Pres. Obama and the Democratic controlled senate, find a compromise on raising the debt ceiling and resolve our fiscal quagmire, they [Republicans] would see that as a failure. Why would compromise be perceived as failure? Simple, if all parties resolve the matter, Republicans see themselves as handing Pres.Obama his re-election on a silver platter in 2012. Bottom-line, it all comes down to politics.