The debt ceiling test

The debt ceiling test

May 20th, 2011 in Opinion Times

For decades, Congress has customarily raised the nation's statutory debt limit to accommodate federal spending by permitting additional borrowing. Republicans did so numerous times for the nation's biggest contemporary presidential spenders, Ronald Reagan and George W. Bush. Now they should feel obligated to raise the debt ceiling for the president who's been forced to clean up the vast wreckage of his predecessor.

When Bush II took office, the national debt - reduced by the Clinton-era surpluses - stood at $5.727 trillion. Under the burden of Bush's profligate credit card spending - for two wars, huge tax cuts and the Medicare prescription benefit - federal debt soared. An obliging Congress, under Republican control for most of George Bush's tenure, meekly signed off on seven increases in the federal debt in his eight years in office.

7 increases for Bush II

The 7th increase under Bush II, in October 2008, pushed the debt ceiling to $11.315 trillion, doubling what it was when he took office. It was necessary to accommodate Bush's banking bailout bill - the Housing and Economic Recovery Act - when the Great Recession that occurred on his lax regulatory watch crashed down on Wall Street and threatened to implode global financial markets.

The debt spending that Bush II left in the pipeline for President Obama for his wars, tax cuts and bailout spending, moreover, will have added at least $2 trillion more to his total when the wars are wound down and the military's rebuilding and veterans' health care cost are tallied.

Wrongly blaming Obama

President Obama's stimulus spending to aid recovery added about $1.5 trillion to the debt. Even so, that deficit owes as much to the loss of tax revenue in the recession as to undue spending. Since World War II, for example, tax revenues have averaged about 18 percent of the nation's gross domestic product. But in 2009 and 2010, tax revenue sank to 15 percent of GDP. This year, it's down to 14.4 percent, the lowest percentage since 1950. Given the depths of the Great Recession and the challenge of stanching the hemorrhaging and alleviating the frightful cost of the economic crash, the relatively high deficit spending largely has been money well spent.

Obama's debt, good results

Obama's stimulus package of $800 billion wasn't fully adequate to the needs, but it has been vital. Forty percent of the Obama stimulus underwrote tax cuts for the middle class. The rest was used to furnish credit for business development when the banks quit lending, to prop up all state governments and their vital services for three years, to extend unemployment and COBRA benefits and expanded Medicaid to help jobless workers, to start some infrastructure and construction work, and to bolster confidence in order to turn the economy around and restore consumer spending and hope. This wasn't wasteful spending.

Those efforts brought 2.1 million new jobs and they have indeed fostered a turnaround, despite all the naysaying of Obama's critics. There won't be a full recovery for years, but the growing economy is a far cry from the depths of the crash in late 2008 and early 2009, when hundreds of thousands of jobs were being jettisoned monthly - 800,000 in the worst month alone.

Now, due to circumstances largely generated by Bush II's gross fiscal recklessness and the resulting loss of tax revenue from both the Great Recession and his unwise tax cuts, President Obama's administration is forced to seek another increase in the debt limit. Yet the extreme right-wing tea party faction of the GOP is poised to resist. Its leaders plan to hold the administration hostage to deep, long-term cuts in the very programs that most help the vast majority of American families.

Their apparent lack of concern for the impact on ordinary Americans, and for the consequences of the past three years, is mind-boggling.

Unleashing the beast

They want commitments from the Obama administration to slash Medicare and Medicaid, though 95 percent of Americans will depend on Medicare, and though Medicaid is vital to fully two-thirds of the Americans in nursing home.

They would end Head Start for the neediest of innocent children and whack food stamps by 20 percent over the next 10 years, never mind their right-to-life mantra. They would eliminate Pell grants for all 9.4 million needy college students. They would end job-retraining programs for workers abandoned by corporations that would use the right's wing's push to approve new trade agreements with three more Asian countries. Obama has correctly refused to sign those agreements until Republicans agree to keep funding job-retraining programs for the workers who would be affected.

Denial on revenue balance

On the flip-side, extremist Republicans refuse to accept a limit or a rollback on tax cuts and tax expenditures (read: corporate tax breaks akin to the breaks they refused to end this week for Big Oil). Never mind that nearly 60 percent of big American corporations use tax loopholes to avoid paying any taxes at all; or that the wealthiest 2 percent of Americans now enjoy the lowest level of taxation since the Great Depression; or that their wealth gap over ordinary Americans has widened exponentially in the last quarter of a century.

Forgetting ordinary citizens

The GOP's tea party faction, and the party's compliant and weak leaders, seem wholly oblivious to the human cost if they get their way, or, if they don't, to the devastating financial impact they would unleash if they refuse to raise the debt ceiling and undermine the world's essential faith and credit in the U.S. dollar.

This nation didn't get to this financial impasse because of Obama's policies. He's merely tried to steer the ship of state out of a hurricane that struck because Republicans lamely let George W. Bush guide the country into a disastrous recession. There's a fiscally sane, bipartisan way out of the debt problem that won't unleash further disaster for ordinary Americans, or jerk the economy back into recession. Republicans need to take it.