Buckle down on debt debate
Ben S. Bernanke, chairman of the U.S. Federal Reserve, waits to speak at the Committee For a Responsible Federal Budget annual conference in Washington, D.C., U.S., on Tuesday, June 14, 2011. Bernanke said lawmakers must raise the nation's debt ceiling in a timely way or risk causing severe disruptions in financial markets and damaging the economy. Credit: Bloomberg/Andrew Harrer
The fog of partisan warfare hovering over efforts to shrink federal deficits is making it difficult to craft a deal to raise the nation's debt ceiling.
Republicans want to head off defections by their anti-tax tea party allies. And they're looking to deflect attacks on their vote in favor of Wisconsin Rep. Paul Ryan's plan to end Medicare as we know it. So they're saying no to any deal that would raise revenue or doesn't get Democrats to join them in cutting Medicare spending.
President Barack Obama and congressional Democrats don't want to do anything to shield Republicans from the heat over Medicare. And they're taking fire for agreeing last year to extend the Bush tax cuts for top earners, which many on the left saw as caving to the rich and powerful. So they're insisting corporations and the wealthy pay this time around.
That's Washington. There's always some partisan political calculation at work. But with the clock ticking ominously toward Aug. 2, when the federal government will run short of cash to pay its bills unless Congress votes to raise the $14.3 trillion debt ceiling, it's time to cut to the chase.
To shrink federal deficits and begin reining in the national debt over the next 10 years, its obvious some spending has to be cut and some revenue has to be raised. And it needs to be done without stalling the already sputtering economic recovery.
So big-ticket items -- such as any fundamental restructuring of Medicare and changes to income tax rates -- shouldn't come on line until later, possibly in years five to 10 of any deficit-reduction plan. By then, the economy should be stronger, with economic growth helping to drive tax revenue up and budget deficits down.
But Washington still can, and must, make more immediate progress toward reducing deficits by agreeing to cut about $200 billion a year in discretionary spending, and to eliminate unwarranted tax breaks and subsidies.
To do that, the military's swollen, $750 billion budget has to be on the table. With the wars in Iraq and Afghanistan winding down, there's a potential savings of $1.4 trillion over the next decade. Some of that should be captured in the next few years. And with the changing character of threats to our security obviating the need for some Cold War weapons systems, there are significant additional savings to be reaped.
To raise revenue, tax breaks for the hugely profitable oil and gas industry should be eliminated. So should agricultural subsidies and other unwarranted corporate tax breaks.
Washington is playing a dangerous game with the debt ceiling. It must be raised by Aug. 2 -- and the sooner the better, to avoid making the nation's creditors nervous. Allowing the United States to default on its debt for the first time in history would be a shock to the global economy, throw the nation's fragile economic recovery into a tailspin, and undermine confidence in the full faith and credit of the United States. No partisan advantage will be enough to shield elected officials from the wrath of voters if they allow that to happen. hN
