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Obama, GOP in a debt-ceiling standoff
The government has reached an impasse over what conditions should be attached to raising the nation's $14.3 trillion debt ceiling.
With a government default looming, President Obama summoned Republican congressional leaders to the White House this week for face-to-face negotiations over raising the federal debt ceiling. Democrats and Republicans had reached an impasse over what conditions should be attached to raising the government’s $14.3 trillion debt ceiling, which will be reached on Aug. 2. The Democrats have agreed to a $2 trillion package of spending cuts over the next decade, but also want to raise about $400 billion in revenue by eliminating tax breaks and deductions that benefit oil companies, owners of corporate jets, and those in the highest tax bracket. “I think it’s only fair to ask an oil company or a corporate jet owner that has done so well to give up a tax break that no other business enjoys,” said the president.
But GOP leaders remained adamant that they would not agree to tax increases of any kind. “The American people don’t want their taxes raised, and they wanted us to cut spending,” said Sen. John McCain (R-Ariz.) “They don’t want compromise.” The White House has warned that Congress must reach a consensus by July 22, to give it time to issue new debt bonds. If the U.S. were to default on its debt obligations, many economists warn, Uncle Sam’s credibility would be ruined, the value of the dollar would likely plummet, and interest rates would surge, possibly leading to another deep recession. But Obama expressed optimism that he could broker a deal. “It’s my hope that everyone is going to leave their ultimatums at the door,” Obama said.
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It’s easy to see why the Republicans are playing hardball, said The Economist. Conservative voters are “implacably opposed” to raising the debt ceiling, on the mistaken belief that doing so opens the door to “future profligacy,’’ instead of paying debts already incurred. Still, legislators will be viewed as traitors if they agree to tax increases. “It still makes sense for Republicans to hold out to the last minute and extract the best deal possible.”
This “game of chicken” has gone far enough, said the Los Angeles Times. The Republicans are right to insist that the government end its spending binge. But, while federal spending makes up roughly 25 percent of gross domestic product, revenues constitute just 14 percent—a 70-year low. Clearly, “spending cuts alone” can’t erase annual deficits now surpassing $1 trillion. The time for ideological posturing is over. “Cut a deal.”
What the columnists said
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The Republican Party doesn’t want a deal, said Michael Tomasky in TheDailyBeast.com. Its leaders want the government to slide into default, and catastrophe to result, because they know that a lousy economy is their “only shot at gaining power.” That’s why the president ought to invoke the 14th Amendment, said Katrina vanden Heuvel in The Washington Post, which says that “the validity of the public debt of the United States...shall not be questioned.” Obama can argue that the clause gives him the right to order the Treasury to continue paying America’s bills, even if Congress fails to authorize it. It may be the only way to defuse the “bomb Republicans have strapped to the hostage.”
It’s overburdened taxpayers and underemployed workers who are being held hostage, said James Pethokoukis in Reuters.com. The U.S. economy is “sputtering,” with a measly 1.9 percent growth rate. Raising taxes on investors and businesses would certainly push us back into recession, while faster economic growth would lead to higher tax revenues. “The GOP should stick to its guns.”
The Republicans have already won this debate, said David Brooks in The New York Times. Democrats have offered them “the deal of the century”—trillions in spending cuts, in exchange for closing some “distortionary” tax loopholes affecting a tiny percentage of the population. But the extremists who’ve hijacked the GOP would prefer to let the nation default rather than give an inch on their “sacred fixation” on taxes. The GOP must decide what party it wants to be—a responsible conservative party, or an “odd protest movement” of unyielding fanatics that is unfit to govern.
