Extending Debt Limit Past Elections Is Right Path
First, some well-deserved kudos to the Senate’s “gang of six,” which came up with a strong, credible and balanced plan to deal with our long-term debt problem.
It was tough enough for Sens. Kent Conrad (D-N.D.) and Mark Warner (D-Va.) to keep plugging away through months of ups and downs, and to put their own reputations on the line for a greater good.
It was even tougher in many ways for Sens. Mike Crapo (R-Idaho), Saxby Chambliss (R-Ga.) and Dick Durbin (D-Ill.) to risk a huge backlash from their respective party bases for taking on the most sacred of cows — and gutsy for Sen. Tom Coburn (R-Okla.) to challenge Grover Norquist and the “pledge” head-on.
And kudos to Sen. Lamar Alexander (Tenn.) to risk some obloquy from his fellow Republican leadership Members to step up and become the seventh group member.
All recognized that movement to deal with this huge problem required serious compromise on all sides.
Like the commission plans that preceded it, the group’s plan still has many details to write and plenty of flaws. But in its framework, it is sensitive to the effect of budget cuts on the most vulnerable among us and recognizes the foolishness of mindlessly cutting our seed corn — the programs that are investments in the future. And it aims to couple the necessary revenue increase with truly attractive and constructive tax reform.
As for revenues, the most common talking point of Republicans in Congress and on Fox News is, “We don’t have a revenue problem, we have a spending problem.”
Here are some facts for freshmen who have heard the talking point and, at times, repeated it. The Bush tax cuts of 2001 and 2003 were done through budget reconciliation to avoid the Senate’s 60-vote hurdle. Reconciliation in the Senate is not supposed to be used for anything that increases deficits.
The rules and numbers were manipulated to use the surpluses built up during the late 1990s to offset the costs of the tax cuts. The tax cuts were designed to expire after 10 years to keep from violating the rules about revenue drain after the 10-year period and to keep from injecting into the official record the consensus projections that if the tax cuts — backloaded and excluding a fix in the alternative minimum tax to disguise their cost — were indeed extended, they would lead to massive deficits in the years that followed.
Guess what? They were extended (by a Democratic Congress and a Democratic president) and are leading to massive deficits in the years that followed. Indeed, if they had operated as the Republican president and Republican Congresses designed them and enacted them, we would have a mere debt headache ahead, not the debt cancer/heart attack we face.
Revenues are at the lowest point in more than 60 years as a share of our economy, partly as a result of the recession, which will pass, but largely because of those continuing tax cuts. It was irresponsible to design a program to have tax cuts expire after 10 years with no intention at all of allowing them to expire, to mask their deleterious effect on our debt.
Of course, if you are really concerned about injecting uncertainty into business decisions, you don’t have tax cuts set to expire, with no clear sense of what might happen after 10 years.
As a New York Times graph on Sunday displayed, parsing out the causes of our movement from 2000 surpluses to 2011 gaping deficits shows that the single largest component is the tax cuts, and if they are permanently extended, they will be a huge contributor to the debt crisis in the future.
Bush administration policies, many of which continue on, are responsible for about four-fifths of the current debt problem. The 2009 stimulus added to the debt, but its effect will dissipate. Given the history, a ratio of one part revenues to three parts spending cuts is a more than reasonable balance.
Of course, the two debt limit options on the table enable Republicans to avoid, for now, even that level of additional revenues.
That we are, at this late date, debating two wholly new plans is absurd, dangerous and irresponsible. That we are even considering kicking most of the items in the can down the road by six or eight months and going through this ridiculous fandango of chicken and blackmail again is the height of irresponsibility.
That’s particularly true as the second round would come at the height of the presidential nominating season, when candidates will be focused not on the national interest but on courting primary and caucus voters who represent a fringe of the electorate, and when most Members of Congress are in the middle of their own primary season, focused on an even smaller fringe element.
Senate Minority Leader Mitch McConnell (R-Ky.) said there was no economic reason to resolve this issue until election passions have cooled — after all, most debt limit increases have been seven months or so in duration. True, but those debt limit increases were straightforward — not tied, as this one is, to other policy demands that draw divisive partisan and ideological lines at the expense of the national interest.
If I were a decision-maker for Moody’s or a Chinese government official holding American debt watching the farce of the past few weeks and saw a resolution that meant we were going to do the same thing again at a more skewed, charged and dangerous time, I would immediately downgrade America’s credit rating by at least two notches. Extending the debt limit until after the election is the responsible path.
This is a defining moment for Speaker John Boehner (R-Ohio). He can go down in history as a statesman or as a weak and opportunistic pol. Right now, it doesn’t look good on the statesman front.
Norman Ornstein is a resident scholar at the American Enterprise Institute.