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

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

[…] Last year (Fiscal year 2011) the federal government spent $3.6 trillion, amounting to 24%of the nation’s Gross Domestic Product. Of that $3.6 trillion, $2.2 trillion was financed by federal tax revenues (business and personal), and $83 billion by excess profits on assets held by the Federal Reserve. The remaining $1.3 trillion was financed by borrowing, adding to the rising national debt. […]

[…] going to go where it’s going to go, regardless of how much liquidity the Federal Reserve is pumping into the economy and stocks. Everyone has now recognized that the economy is slowing down […]

[…] The COLA is determined each year by the increase, if any, in the third-quarter CPI over the index level a year earlier. The 3.5 percent estimate is based on July and August CPI numbers, which have been a very accurate gauge of the likely COLA increase. Final calculations can only be made when September data is released on October 19. Eligible recipients will receive the cost-of-living adjustment in December, unless Congress takes action to block the increase (because it increases our national debt). […]

Anonymous

[…] choices will have to be made around who gets paid and who doesn’t.  Hopefully Congress can reach a resolution before it comes to this. I will provide further updates on this story and encourage you to stay […]

PoorFuture
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… Read more »
Edward Larson
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… Read more »
O'seas American
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… Read more »
Al Bennet

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!

David
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… Read more »
Gail

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.

Bansheeq

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!

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.

Vern Nay
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… Read more »

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.

Franklin Germanc

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.

Gefite

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.

Gefite

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.

MikeP

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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