Raising the National Debt Ceiling: The Constitution and the Full Faith and Credit of the U.S. Government. Why governments run deficits, and why, until the Republican Party lost its collective mind, raising the U.S. debt ceiling was considered a legitimate — and routine — response to th.e needs of a growing population.
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If you’re a Democrat, indeed if you’re an informed American, it’s hard to get very excited about the new plan which has been proposed to expand the debt ceiling.
Certainly the debt ceiling needs to be raised to prevent the US from defaulting on our obligations. But in crafting the plan, Congress and President Obama mostly ignored recommendations from the President’s bi-partisan deficit panel and the bi-partisan “Gang of Six” Senate panel. They (and the media) also completely ignored the People’s Budget Plan put forward by the Democratic Progressive Caucus. Instead, they were forced to embrace many ideas from the Tea Party and Republican deficit hawks.
Even if the plan passes both houses of Congress and is signed into law, the debate and resulting uncertainty have had a devastating impact on an economy that was already struggling. As the debate raged through the first half of this year, the economy grew at an anemic annual rate of only 0.8 percent and there are limited options of improving it. Before the deal, federal spending was already in steep decline, the stimulus money has largely been spent, and there’s little chance the administration will be able to convince Congress to pass new stimulus. On top of all this, we recently learned that that the Great Recession was much worse than previously thought.
Even in the defense industry, the effects of the debt debate have been noticeable. According to the chief executive of Northrup Grumman, Wesley G. Bush, “Uncertainties surrounding the debt ceiling and future defense budgets caused our customers to move more slowly and spend more conservatively. We did not see the recovery in spending that one might have expected.”
With all of that said, according to a report by the Associated Press, here’s what the new debt ceiling plan will do:
—Immediately increase the debt limit by $400 billion, with Obama permitted to order another $500 billion increase this fall unless both House and Senate override him by veto-proof margins; a third installment of between $1.2 trillion and $1.5 trillion would be made available after enactment of matching levels of additional spending cuts recommended by a special joint committee of lawmakers.
—Cut more than $900 billion over 10 years from the day-to-day operating budgets of Cabinet agencies. Caps spending passed by Congress for agency budgets at $1.043 trillion in 2012, $7 billion below 2011 levels.
—Create a 12-person, House-Senate committee evenly divided between the political parties, and charged with producing up to $1.5 trillion more in deficit cuts over 10 years. If a majority of the committee agrees on a plan, it would receive a vote in both the House and the Senate. If the panel deadlocks or fails to produce at least $1.2 trillion in additional cuts, or if Congress fails to enact its recommendations, the White House budget office would impose across-the-board spending cuts across much of the federal budget, including the Pentagon, domestic agency budgets and farm subsidies. Many federal benefits programs, however, would not be covered by this, including Social Security, Medicaid, veterans’ benefits, and federal retirement benefits.
—Require both House and Senate to vote on a balanced budget amendment to the Constitution.
—Establish “program integrity” initiatives aimed at stemming abuses in benefits programs like Social Security.
—Increase funding for Pell Grants for low-income college students by $17 billion over 2012-13, financed by curbs in student loan subsidies.
So how is the deal being received outside of Washington?
Speaking this past Sunday on ABC, Mohamed El-Erian, chief executive of the bond investment firm Pimco, said “Unemployment will be higher than it would have been otherwise. Growth will be lower than it would be otherwise. And inequality will be worse than it would be otherwise. We have a very weak economy, so withdrawing more spending at this stage will make it even weaker.”
In a recent op-ed, Robert Reich wrote “The deal does not raise taxes on America’s wealthy and most fortunate — who are now taking home a larger share of total income and wealth, and whose tax rates are already lower than they have been, in eighty years. Yet it puts the nation’s most important safety nets and public investments on the chopping block. It also hobbles the capacity of the government to respond to the jobs and growth crisis.”
Nobel Prize-winning economist Joe Stiglitz said, “The cost of the wars in Iraq and Afghanistan alone will exceed $5 trillion. With a cost like this, why isn’t war central to the debate over the national debt?”
And Arthur Delaney of the Huffington Post wrote “The long-term unemployed have been left out of a deal between congressional negotiators and the White House… Anyone laid off after July 1 is ineligible for extra weeks of benefits.”
Given the obvious problems with the new debt deal, you may ask, why would Democrats ever agree to it? After all, recent Democratic administrations are only responsible for $2.8 trillion of the national debt while their Republican counterparts (especially the administration of George W. Bush) are responsible for $9.5 trillon. The answer probably lies in a statement by Bruce Bartlett, former Reagan Policy Adviser and Deputy Assistant Treasury Secretary under George H.W. Bush. When he was a guest on MSNBC’s Hardball with Chris Matthews recently, he said, “A good chunk of the Republican caucus is either stupid, crazy, ignorant or craven cowards who are desperately afraid of the Tea Party people. And rightly so.”
Here is the schedule of upcoming Democratic Perspective broadcasts for August, 2011:
August 1: The Debt Ceiling: What It Is and Isn’t.
Democratic Perspective’s co-hosts, Steve Williamson and Mike Cosentino, explain the history of the U.S. Debt Ceiling — how it originated, why it has rarely been an issue in the past, its apparent conflict with the U.S. Constitution, and why the Republicans have found it a convenient weapon in their crusade to end spending on federally-funded social programs.
August 8: Andrei Cherny Interview.
Andrei Cherny, Chair of the Arizona Democratic Party, presents the challenges facing Arizona, and the Democratic Party’s response to them. Part 1 of a continuing series of discussions intended to keep Democratic Perspective’s listeners abreast of political issues in Arizona as we approach the 2012 elections.
August 15: Aviva Chomsky on Immigration.
A Democratic Perspective interview with Aviva Chomsky, an American historian, author, and activist who has written extensively on immigration issues. She teaches at Salem State College in Massachusetts, where she is also the coordinator of the Latin American studies program.
August 22: Aviva Chomsky Interview, Part 2.
August 29: To Be Announced.
Coming soon: More on the realities of privatization and deregulation, and a Labor Day look at what’s happened to wages and income distribution in the U.S. since the beginnings of globalization in the 1970s and 80s.
Join us on am780 KAZM for a fresh look at the issues of the day from a reality-based Democratic Perspective.
Debt Ceilings and the Deficit: The Republicans Threaten To Wreck the Government — Again. Newt Gingrich tried shutting the government down in 1995, and got handed his walking papers, but Republicans are nothing if not persistent. John Boehner’s grandstanding may cost the American government billions of dollars in interest payments, and the American people their future, but he thinks he’s winning. Democratic Perspective lays out just how dumb he has to be to believe it.
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For months now, the Republicans (especially the Tea Party representatives) have used the debt ceiling as a means to leverage power against President Obama and the Democratic Senate. As we recently pointed out on Democratic Perspective, this is an entirely artificial crisis. Contrary to the rhetoric of Republicans, refusing to raise the debt ceiling will NOT cut the national deficit. It will NOT balance the budget. And it most certainly will NOT create jobs.
What it will do is drive our struggling economy off a cliff.
Since March of 1962, our nation has raised the debt ceiling more than 70 times. Ronald Reagan raised it 17 times. George W. Bush raised it 7 times.
Of course, this is not the first time that a vote on the debt ceiling has been politicized. There have been votes against the debt ceiling to protest wars and other issues. Indeed, even then Senator Obama voted against raising the debt ceiling when Bush was president as a protest against the unfunded Iraq War. But the ultimate passage of the measure has never before been in doubt.
To be clear, by raising the debt ceiling, Congress is simply stating that the United States will meet its obligations. The money has already been authorized by Congress. According to Treasury Secretary Timothy Geithner, failure to raise the debt ceiling will force the U.S. to selectively default on its obligations. And it will mean that U.S. bonds will be downgraded and foreign investors will be hesitant to buy U.S. Treasury Bills (currently the world’s most sound investment).
This could result in a variety of potentially catastrophic events. The dollar could be replaced as the world standard currency. Interest rates on everything from credit cards to home loans could skyrocket. Social Security checks could be delayed or, worse yet, bounce. And world stock markets could crash, driving down the value of our 401ks. Or, to quote former Treasury Secretary Lawrence Summers, it would be “Lehman on steroids.”
Yet despite these warnings, some Republicans (especially the Tea Party backed Congressional representatives) still don’t want to raise the ceiling under any circumstances. It would seem that they want to follow the path of their Republican predecessors who refused to vote for TARP (Troubled Asset Relief Program) in 2008 until the markets crashed.
If Republicans refuse to reach a compromise on a plan before Tuesday, August 2, the President has one other potential option: The United States Constitution. Section 4 of the 14th Amendment states, “The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned.”
Although Constitutional scholars are divided on the legality of the President invoking this option, it does provide a safety net for our economy. And even conservative Republican Senator Chuck Grassley has said that the 14th Amendment seems to over-ride the notion of a Congressional debt ceiling.
Let’s hope that this step is not necessary. It would almost certainly result in a lengthy court battle and possible impeachment. But, in our opinion, it’s better than the U.S. defaulting on its debts.
The Arab Spring and U.S. Foreign Policy: The Democracy Deficit There and Here. In the second part of Democratic Perspective’s interview with Professor Chomsky, he offers his insight into the causes and likely outcome of the revolts which led to this year’s Arab Spring. What are the objectives of U.S. foreign policy with regard to the changes in Tunisia, Egypt, and the Middle East in general, and why aren’t they necessarily reflective of U.S. public opinion?
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Two Perspectives on Immigration: The Right to Make a Living vs. the Right to a Secure Cultural Identity. Distinguished professor of linguistics and world-renowned philosopher, political dissident and cultural critic Noam Chomsky shares his insight on U.S. immigration policy with Democratic Perspective. He discusses a little of its history in the Southwestern U.S., and the reasons why it’s currently causing such acrimony in our political discourse.
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Democratic Perspective continued our conversation with AZ House Minority Leader, Chad Campbell. This week, the subject was privatization. According to Campbell, privatization sometimes makes sense, but you need to look at each situation carefully. For example, he talked about the problems of privatizing prisons which resulted in last year‘s prison break leading to the murder of several innocent people.
“The system went horribly wrong,” he said. “The breakdown was astonishing. And the lack of oversight was horrible. Anytime you commoditize something like a prison, you open yourself up to bigger risks like public safety. We want to make sure that we’re not opening more private prisons because of the safety issue,” he continued. “There’s this myth out there that private prisons are cheaper than public prisons. That they always save the state money. That’s simply not the case,” he said. “Even the Department of Correction’s own study that came out about two months ago shows that private prisons are actually costing the state more money than public prisons.
Private prisons get to cherry pick the prisoners they take in. They don’t take in high risk prisoners. They don’t take in prisoners with health problems. And, if their prisoners develop health problems, they push them back to public prisons. They’re taking the cheapest prisoners and they’re providing them with some of the lowest security possible – very low staff to prisoner ratios – and they’re jeopardizing the public,” says Campbell.
“I haven’t seen any study yet that shows private prisons save states money. Unless, of course, the study has been funded by a private prison company,” he said. “It’s time to put an end to this really horrible practice in the state of Arizona.”
According to Campbell, when it comes to privatization, you have to look at the facts. “Each case has to be looked at on an individual basis and decide if it’s going to save money or not, and whether it’s going to provide an effective service or not.,” he said. “There are some things the government shouldn’t do like running food services at state parks. It may make sense to privatize rest stops, too. We need to research each issue.,” he continued.
Unfortunately not everyone agrees. “The Republican response is that privatization is always good,“ says Campbell. “They see this financial crisis as an opportunity to decimate the public sector at all costs. “The problem is that you have people down here who are not looking at the facts. They’re simply sticking to an ideology. We need people using common sense and making tough decisions based on facts.”
This attitude carried over into recent budget cuts. “The biggest victim of cuts is public education,” said Campbell. “And it’s amazing to me that people don’t think about what they’re doing. Rather than think about long term economic solutions for the state, they’re taking the easy road. In the process, they’re jeopardizing the future. They’re laying off thousands of hard-working teachers, forcing them to take unemployment, forcing them on welfare. The legislature is led by people who want to gut public education. That is their goal,” he continued.
“The majority party doesn’t let many minority bills get through,” he said. “That’s the symptom of a broken system. I would hope, at some point, we can have a debate about the issues and not just politics,” says Campbell.
He pointed to an incident that took place in the last session. “I introduced a bill that would have lowered the corporate tax rate because I do believe it was too high,” Campbell said. “But I would have been closing some of the bad tax credits and some of the bad programs to pay for it, as opposed to the Speaker’s bill which lowered all the tax rates and threw away about a billion dollars a year. My bill got the endorsement of Bob Robb, the conservative columnist of the Arizona Republic. He said my bill was better than the Speaker’s bill. But it didn’t even get a hearing because it was a minority bill” Campbell continued.
“I believe it’s a very broken system. We need political courage from the Governor’s office down to the legislature,“ he concluded.
When Privatization Makes Sense and When It Doesn’t: Arizona State Representative and House Minority Leader Chad Campbell continues his discussion with Democratic Perspective. The real results of Arizona’s experiments with privatized prisons, and why we should be concerned about the threat to public education represented by Republican ideologues whose agenda is at odds with common sense.
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Here is the schedule of upcoming Democratic Perspective broadcasts for July, 2011:
July 4: Chad Campbell Interview, Part 2.
Representative Chad Campbell is the House Democratic Minority Leader in the Arizona State Legislature. Now in his second term, the Phoenix native and lifelong Arizona resident sits on the Commerce and Government Committees and has led the fight in improving the Clean Elections system, protecting consumers from fraud and predatory lending, and improving neighborhoods by cracking down on graffiti and gang crimes. Campbell has also been recognized for his work on economic development issues, being named one of the “Tech Ten” Legislators of 2008 and 2009 by the Arizona Technology Council, and receiving an Eagle for Enterprise Award from the AZ Small Business Association. In addition to his duties at the legislature, Chad is a private consultant and serves on the Phoenix Environmental Quality Commission.
July 11: Noam Chomsky Interview, Part 1.
Noam Chomsky is a world-renowned linguist, philosopher, cognitive scientist, and activist. He’s an Institute Professor and Professor Emeritus of Linguistics at the Massachusetts Institute of Technology, and is well known in the academic and scientific community as one of the fathers of modern linguistics, and a major figure of analytic philosophy. Since the 1960s, he has become known more widely as a political dissident. Chomsky is the author of more than 150 books and has received worldwide attention for his views.
July 18: Noam Chomsky Interview, Part 2.
The July 11 interview continued.
July 25: To Be Determined.
Coming soon: interviews with Arizona Democratic Party Chair Andrei Cherny, more on the realities of privatization and deregulation, and a look at what’s happened to wages and income distribution in the U.S. since the beginnings of globalization in the 1970s and 80s.
Join us on am780 KAZM for a fresh look at the issues of the day from a reality-based Democratic Perspective.
