Will The Debt Ceiling be Raised and Who’s to Blame for This Mess – Republicans or Democrats?

18 comments

The national debt debate continues with millions of federally funded individuals and corporations facing the real prospect of taking a big hit to their bottom line if the debt ceiling is not raised. Whichever side of the debate you are, the fact is that over the past 30 years the debt ceiling has been increased by both parties and a number of democratic and republican presidents. This is borne out in the graphic below from the Washington post.

Who raised the debt ceiling - Republicans and Democrats

The biggest contention on a “big debt” deal being reached is essentially around including tax hikes and/or repeal of current tax breaks as part of the equation to justify raising the debt ceiling. While spending cuts, which mainly affect those who rely on government funded entitlement programs, will reduce how much needs to be borrowed, tax hikes provide a much more long lasting source of revenue and generally affects a smaller base of higher income earners. This is what the democrats are saying.  Republicans on the other hand feel that any tax hikes or repeals will slow down economic growth since small and large business owners, who will be the primary groups impacted by tax hikes, will cut back on spending and hence hiring.

Both parties have debt reduction plans in place and next week Republicans will put forward their plan for a vote in the house (which they control) while Democrats will try and muster more support for the President’s proposals. However neither party has the numbers to get a plan all the way through Congress and unless tax hikes are in the plan, Obama will not sign off on the deal.

My opinion is that if no debt reduction plan is reached in the next two weeks a short term extension will be put in place for an interim increase in the debt ceiling. Congress and the American economy will then continue to muddle along until a more effective plan is put in place. But I would be willing to bet that we will be back to square one the next time it comes to raising the debt ceiling. The game of political football will resume once again.

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{ 14 comments… read them below or add one }

PoorFuture July 18, 2011 at 11:55 am

Four things I used to believe:

1. That this was a Great Nation, blessed by God and doing His will in this world. We’re doing the will of SOME super-natural being, but it ain’t God.

2. Our leaders we’re the epitome of truth and decency, standing up for the little guy, putting the needs of the many above the needs of the few. Now the corrupt crooks in charge rush to enforce laws that everyone is against, nobody wants, and only benefits a chosen few. An American politician used to be the symbol of honesty and incorruptibility: now they are a euphemism for the lowest untrustworthy dregs of society.

3. Americans were decent, hard working individuals, ever vigilant when it came to their … liberty and helping their neighbour. Now, the only way to get a person interested in liberty is to threaten to take away their right to log onto Facebook.

4. Our children used to be our Promise of Tomorrow. Now I just watch them and wonder, “God, how could we have gone so wrong?”

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Edward Larson July 18, 2011 at 10:49 am

I have been reading a lot about this topic on the web and as I have commented at a number of sites, there’s a lot of BS flying around DC about the “Debt Ceiling.” So let’s put things into perspective:

Imagine that you have a credit card with a $1,400 ballance. You have used this credit card for years and you always make the minimum payment on time, but the balance has gradually grown and you are near your credit limit.

Now imagine that the credit card company is concerned about you running up such a high balance and so they refuse to raise your credit limit. What happens? Do you suddenly ruin your perfect track record? No, of course not, you simply quit using that credit card, you may have to change your spending habits, but you don’t suddenly decide not to make the payments.

The situation we are in is this, our representatives have gotten used to using that credit card, they have bought expensive gifts with it for their friends and family members. They like that credit card, they love using it, and they don’t want to change their habits. So they are throwing a temper tantrum and threatening to quit making the payments if we refuse to raise their credit limit. It’s a bluff folks, nothing but a bluff.

The world does not end if we reach our credit limit, not for us anyway. What happens is that Congress will be forced to change their spending habits, and that is something that is long overdue. Speaker Boehner is right to demand substantial spending cuts before he considers an increase in the debt limit. We should all welcome this approach. Otherwise DC continues to spend like there is no limit and we will all pay the price for that.

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O'seas American July 18, 2011 at 10:47 am

As an American living abroad, I applaud the idea of not raising the debt limit. Primarily, this is for only one single reason – the continued collapse of the US dollar is personally of benefit to me. As I receive my income in foreign currency – the lower the dollar goes, the better for me in terms of my own purchasing power within the US.

I have been truly amazed by the slow motion collapse of the US both economically and morally as driven by the recent entry of large numbers of ‘normal American’s’ into politics. Morally – meaning it seems the ‘me and mine’ is back in style as it was in the 80′s with Reagan. Truly, it is amazing to hear people simple say cut everything – who cares the results to the poor, the sick, the huddled masses upon which our great nation was founded.

It is incomprehensible to hear some of our politicians speak as if teachers, fireman, policemen, and DMV workers are the root of all our problems while we all know we need these folks and do not pay them enough to do such demanding and thank-less jobs. As if the average worker making $35-40k per year is the problem vs the loss of corporate morals, the lack of caring for our fellow man, and the degradation of the general collective pride American’s have when being able to say we are #1. Of course, #1 is not true these days except in GDP – we have more poor, more sick, more dying, lower educated, and generally a second class citizenry compared to our global peers – and we want to drive this further into the abyss through returning to the “ME” way of thinking.

Honestly – India now has more ‘honors’ kids than the US has kids in total, China is focused on expanding their English language to increase their influence globally, Asia in general is now viewed as the area for growth, innovation, and leadership and US and Europe drive themselves into irrelevance.

It makes me sad – everything is now about name calling and “my way only” approaches – hostage taking whether with our country’s economic relevance our families health care – seems to be the new negotiation approach. There is no sense of respect for eachother, no value of differences that made our country strong, the final remnants of the great USA in terms of the success of diversity (of race, religion, and ideas) coming together is gone.

So – I with heavy heart I root for collapse for my own good. I sit comfortably across the ocean enjoying universal health care, strong public benefits, a truly diverse and accepting county with a mix of races, cultures and religions where there are 4 national languages, 5 national religions in which holidays from each are celebrated by all (they are national holidays for all) . Where, despite these horrible ‘social services’ and radical and different people gather – our ecomony remains sound and a beacon of growth along with others in Asia.

Each year as I see the discourse in the US degrade, the name calling increase, the true hatred for fellow men, women and children who don’t espouse the same thoughts as others – I gradually slip into viewing things from the outside and finding myself saying “I am proud to be an American for what we ‘USED’ to stand for and what we accomplished in the PAST but I cannot say the same for today” – when asked to explain to others just what is happening now – I can honestly say I have no idea…..sad, really.

Enough of my rambling. I encourage everyone to try to consider what made us great – working together to overcome. Together we stand, divided we fall – today it truly a divided country bound to fall.

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Al Bennet July 17, 2011 at 4:55 pm

After the last 3 years of “big deals” by this President, I’d say we can’t afford another one! His record of unmitigated disaster on every issue easily eclipses the pathetic Carter administration in weakening our country. We desperately need a confident President that knows how to build coalitions and get this country’s economy rolling again…and Obama ain’t him and will never be!

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David July 17, 2011 at 4:54 pm

It’s nice to see a balanced article that illustrates the type of political courage that serious deficit reform requires. The late Senator Daniel Patrick Moynihan said that the Social Security reforms in the early 80′s, which raised the payroll tax and the retirement age, proved that the Congress could still govern.

Let’s cheer on both Obama and Boehner and help them make the $4 trillion compromise, which gets us out of the red zone and back into the yellow. We have nearly complete unanimity on the problem and a dozen expert panels have spoken on the solutions.

Ben Franklin’s famous speech at the Constitutional Convention should be required reading now:

“For when you assemble a number of men to have the advantage of their joint wisdom, you inevitably assemble with those men, all their prejudices, their passions, their errors of opinion, their local interests, and their selfish views. From such an assembly can a perfect production be expected? It therefore astonishes me, Sir, to find this system approaching so near to perfection as it does; and I think it will astonish our enemies, who are waiting with confidence to hear that our councils are confounded like those of the Builders of Babel; and that our States are on the point of separation, only to meet hereafter for the purpose of cutting one another’s throats. Thus I consent, Sir, to this Constitution because I expect no better, and because I am not sure, that it is not the best. The opinions I have had of its errors, I sacrifice to the public good. I have never whispered a syllable of them abroad. Within these walls they were born, and here they shall die. If every one of us in returning to our Constituents were to report the objections he has had to it, and endeavor to gain partisans in support of them, we might prevent its being generally received, and thereby lose all the salutary effects & great advantages resulting naturally in our favor among foreign Nations as well as among ourselves, from our real or apparent unanimity…On the whole, Sir, I can not help expressing a wish that every member of the Convention who may still have objections to it, would with me, on this occasion doubt a little of his own infallibility, and to make manifest our unanimity, put his name to this instrument.”

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Gail July 17, 2011 at 4:28 pm

I am sooo mad that all the news has been occupied by this when Washington has so many other items to focus on like further unemployment extensions, health care reform, green energy rebates. Everything is on hold until this so called “accounting” debt ceiling is increased. Can’t we just sell the hold in fort knox (worth like 1/2 trillion dollars) to see us through the rest of the year at least. We are becoming more and more like Greece every day. Protests on the street are not too far – just look at some of the state battles.

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Bansheeq July 17, 2011 at 12:34 pm

Ronald Reagan worked with the then Democratic Speaker of the House Tip O’Neill and a Democrat controlled congress to cut spending, raise revenues and reform Social Security, Perhaps Obama should take a leaf out of his book, rather than his idol – Abe Lincoln, who never really had to worry about a debt ceiling!

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TFB July 17, 2011 at 12:19 pm

Who’s to blame? The American public, because they want something for nothing.

Social Security, Medicare, Medicaid, prescription drug coverage, free/subsidized health insurance for the uninsured, unemployment benefits, pension for teachers, police, and firefighters, … all great, if you have the money to pay for them. On the taxes side, tax deferred/tax free retirement accounts, mortgage interest deduction, tax break for college expenses, child tax credit, earned income credit, … all great, if there is enough revenue to cover the expenses already.

It’s really not different from personal finance. You can’t buy a big house and send your kids to private school and say you only want to work 10 hours a week. Cut the expenses and tax breaks we can’t afford. Until the deficit turns into a surplus, the debt will only grow.

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andys2i July 17, 2011 at 12:48 pm

What to do is common-sense and has been covered extensively as you alluded to. However politics and commonsense don’t always cross paths and hence we end up here. Rather than worrying about the nation in 2050, politicians are worried about getting re-elected in 2012. This is the scary part about leaving the long term future of our nation to a bunch of folks who are only focused on the short term.

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Vern Nay July 17, 2011 at 5:49 pm

Instead of SS why didn’t you mention welfare checks, food stamps, benefits for illegal aliens, etc. Your nothing but a socialist. SS is money that was deducted form working peoples paychecks, and done unconstitutionally because it denies a persons right to freedom of choice. However the American worker had no choice in the matter and the govt. has stolen this money from the people to spend on other things. This amounts to grand theft, All the social welfare agency’s dole out our tax dollars to people who contribute nothing to the country and never will. These people should be left to starve in the streets or get a job. And don’t tell me there’s no jobs so its the taxpayer who must pay for their laziness. The reason there’s no jobs is because the socialists in govt. have made it almost impossible for the free enterprise system to work and outsourced most of the jobs we have to other lands. the govt. owes this ss money to the people who worked and paid into it every month of their working lives. You are not American in you thinking in the least. I would suggest you read the constitution and bill of rights. The only fault the people have in this mess is trusting either party of elitists to go to wash. and honor their oath of office.

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Franklin Germanc July 17, 2011 at 11:24 am

The Big deal is really an inadequate deal. The small deal is a joke. They can’t even have a serious conversation. We are going to feel the pain from this stupidity very soon. When treasury puts bonds up for sale and the buyers don’t pay a premium, That will increase the cost of carrying the huge debt. It could cost more to just pay interest on the debt than to pay Social Security. Much more than DOD. There isn’t enough money in the income of the top 5% to eliminate the deficit if we took 100% of their income.

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Gefite July 17, 2011 at 11:18 am

While Tea Party Republicans are correct when they say that there will be enough revenue to avoid default and pay Social Security benefits, they are incorrect to suggest that the current debt ceiling can be maintained without major disruptions. Failure to increase the debt ceiling will have significant effects on our economy and that will ripple throughout the global economy as well.

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Gefite July 17, 2011 at 11:17 am

Republicans keep saying that the debt ceiling increase was requested by the President – What they forget to say is that it was requested by President Obama so that he can carry out Congress’ spending orders. In the Constitution, Congress is given authority over the budget. The spending has already been authorized by Congress, and the President is required to carry out Congress’ spending orders. Some of those spending orders were passed by Democratic led Congresses, some were passed by Republican led Congresses. Out politicians should check their facts before appearing on Sunday news programs spouting their biased and uninformed views.

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MikeP July 17, 2011 at 11:21 am

Sorry gefite you are wrong. Unless the president gets off of his absolute obsession with raising taxes, Republicans are not going to agree to do anything that will harm our economy — and job-killing taxes will harm our economy. It all depends on the president and whether he is wiling to compromise with Congress. America is a democracy, not a dictatorship. The DEMOCRATS should remember that.

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