Hot Reads
8 Great Opinion Pieces on the Debt Crisis
The Failure of the Grand Bargain
The death of the Grand Bargain over the weekend is a reminder that what John Boehner wants doesn’t matter, writes Ezra Klein. It’s increasingly clear that Boehner doesn’t speak for the Republican Party, and what the Republican Party really cares about, more than cutting the deficit, is cutting taxes. Given that the fight is really about taxes, Republicans may come to regret not taking Boehner’s deal. In reforming the tax code, it would have preempted the expiration of the Bush tax cuts, which Republicans will now have to take up in 2012, when they won’t have nearly the leverage they have now. If they’d agreed to Boehner’s deal, taxes would have gone up by $1 trillion. If they can’t extend the tax cuts next year, they’ll go up by $4 trillion.
It’s beginning to look a lot like Obama will have to settle for a short-term fix, says Howard Kurtz. The math for a far-reaching deal just isn’t there. Boehner wasn’t able to get support for the $4 trillion plan this weekend, with House Majority Leader Eric Cantor insisting on a $2 trillion fix. Without the support of Republicans who ran on no-new-taxes pledges, Boehner would have to woo Democrats skittish of Medicare cuts. In a hint that a short-term compromise may be in the works, Senate Minority Leader Mitch McConnell told Fox News that he has a “contingency plan” in his back pocket.
Ross Douthat argues that Republicans’ stance isn’t as crazy as it seems. The Republicans sense, according to Douthat, that Obama isn’t as opposed to spending cuts as he lets on. In order to earn his deficit-cutting bona fides for 2012, Obama is using the Tea Partiers to push Democrats to accept more budget cuts than they otherwise would like to. Furthermore, Republicans see that taxes are going to go up, either because Obama will be reelected or because an aging population will make Medicare cuts politically deadly. So the debt ceiling gives Republicans every reason to drive as hard a bargain as they can.
With the foundering of the Grand Bargain this weekend, Jonathan Chait renewed his call for a “medium deal,” a more modest compromise that would result in no net change in revenue. One such deal would phase out a small selection of tax breaks for such things as corporate jets and racehorses, adding about $500 billion in revenue, while resulting in between $1.7 trillion and $2.3 trillion in tax cuts. That seems like an unpalatable deal for Democrats, except that the cuts proposed come from permanently fixing the Alternative Minimum Tax, which every couple of years is adjusted to affect fewer people. A permanent fix would count as a tax cut in long-term budget projections without changing actual revenue, making it a potentially attractive compromise for both parties.
An exasperated Matthew Yglesias points out that Congress doesn’t have to do this to itself. It can just do what it’s done for the past 100 years whenever it’s run up against the debt ceiling, which is to raise the ceiling. Republicans and Democrats aren’t going to agree on the larger issues, he argues, so they should just put off fighting about Social Security and taxes and defense spending and Medicare for the 2012 elections and raise the ceiling now, a “clean” version with no strings attached.
Several falsehoods and exaggerations have been bandied about.
Don’t look to the Constitution for a way out of this mess, writes Laurence Tribe. Several lawmakers, academics, and even Treasury Secretary Timothy Geithner have said that Section 4 of the 14th Amendment may allow the government to sidestep the debt limit. The section says that “the validity of the public debt of the United States, authorized by law... shall not be questioned.” Proponents of the constitutional option argue that this clause either prohibits any government action that increases the risk of default, or prohibits default itself, empowering the president to violate the debt ceiling in order to keep the government solvent. Tribe argues that both interpretations grant the president too much power—if the threat of default allowed the president to borrow money without congressional approval, why wouldn’t it allow him to raise taxes, coin money, or sell government property?
Reason magazine’s editor, Nick Gillespie, calls the debt-ceiling crisis a false one, a MacGuffin that Republicans and Democrats are using to fight about spending and revenue. As such, several falsehoods and exaggerations about it have been bandied about. August 2, Gillespie says, is a bit of an arbitrary date, the Treasury’s estimate for when it no longer can stave off default. That the government will default once it passes the debt limit is another half-truth, says Gillespie. The government won’t default unless it chooses to, though it may have to do some unpleasant things to avoid it, like selling off its gold reserves. But these are quibbles. The real issue, writes Gillespie, is that government spending, including military spending, has grown exorbitantly over the last 10 years, and is too detached from decisions about raising revenue.
Bruce Bartlett, a former adviser to President Reagan and a Treasury official under George W. Bush, debunks some myths about the debt limit. First of all, he points out that the limit isn’t an effective tool to limit spending, as Republicans claim. It caps the amount of securities the Treasury can issue, which it does to raise money for already-existing government expenses. In threatening not to raise the debt limit, Congress is threatening to not let the Treasury pay the bills Congress itself ran up, which, Bartlett says, “makes no sense.” Other myths in the debt-limit debate include the argument that default won’t have catastrophic economic repercussions, that tax increases would be economically harmful, and that the debt limit is a partisan issue. Senator Obama in 2006, Bartlett points out, voted against raising the debt limit.