In less than two weeks, American legislators will have to vote to raise the debt ceiling for the country’s nearly $14.3 trillion debt or face a possible default for the first time in the nation’s history. Many pundits believe that this could cause a global calamity.
If Congress fails to raise the debt ceiling by August 2, stock markets could plummet, interest and mortgage rates would rise and the U.S. Dollar could lose its elite status, all affecting the United States’ perfect AAA credit rating.
Exchanges have been going on between Republicans, Democrats, the House, Senate and President Obama for the past few weeks about raising the debt ceiling, but no plan has been decided on.
“Simply put, it will take a balanced approach, shared sacrifice, and a willingness to make unpopular choices on all our parts,” President Obama said in a statement on the White House website last week. “That means spending less on domestic programs. It means spending less on defense programs. It means reforming programs like Medicare to reduce costs and strengthen the program for future generations. And it means taking on the tax code, and cutting out certain tax breaks and deductions for the wealthiest Americans.”
Democrats, along with President Obama, want to raise the debt ceiling and have agreed to upwards of $4 trillion in spending cuts while increasing revenues by $1 trillion generated from closing certain tax loopholes such as corporate jet subsidies and cutting tax breaks for the wealthiest Americans.
But few Republican leaders see this as a good compromise and would rather see spending cuts and caps on future spending without raising revenues.
House Republicans held a vote Tuesday which passed the Tea Party’s solution to deficit reduction called the “Cut, Cap, and Balance Act of 2011.” This bill would cut spending and make raising the corporate tax rate near impossible.
The GOP plan calls to cut spending by $111 billion in fiscal year 2012, cap future spending to a percentage of GDP, require a balanced budged amendment before the President could have the authority to raise the ceiling and only authorize tax increases if passed by a supermajority.
The cuts would likely come in the form of entitlement reform, which would include, but not limited to, Social Security and Medicare.
The head of the nonpartisan Center on Budget and Policy Priorities (CBPP), Robert Greenstein, has called the Tea Party’s plan extreme and said he believes that a better deal with real compromise is the answer.
“[This plan] is one of the most ideologically extreme pieces of major budget legislation to come before Congress in years, if not decades,” Greenstein said in a statement on CBPP’s website. “It would go a substantial way toward enshrining Grover Norquists’s version of America into law.”
In the likely sense that the Tea Party plan fails to pass the Senate, Senate Majority Leader Harry Reid, D-Nev., and Senate Minority Leader Mitch McConnell, R-Ky., have come together to hatch a Plan B of sorts.
Their plan would raise the debt ceiling by $2.5 trillion in three increments. At each increment, Congress would vote on a resolution of disapproval on raising the debt ceiling. If the President vetoes the resolution, the ceiling would be raised and possibly save face for many conservative legislators that don’t want to raise the ceiling.
The original plan called for no spending cuts, but now there is a possibility that the plan would require $1.5 trillion in cuts over ten years. The plan would also call for a 12 member bipartisan committee.
The White House released a video last week of President Obama trying to explain to college students at Tech Boston Academy in Dorchester, Ma. the valuable lesson of compromise -- a lesson that will come in handy when dealing with the debt crisis.
“If you’re only talking to people with who you agree with, then politics is always going to disappoint you,” the President said. “The danger of our democracy and the nature of our politics is to marry principle to a political process that means you don’t get 100 percent of what you want. You can be honorable in politics understanding that you’re not going to get 100 percent of what you want.”
Rep. Jason Altmire, D-Pa., said that he understands the difficult times the nation is facing but believes the federal government should lead by example and said he would not vote to raise the ceiling unless major spending cuts are made.
“I have made it very clear to my colleagues that I will not vote to raise the debt ceiling unless we make significant cuts in federal spending and take steps to reduce our long-term debt,” Altmire said in an email. “I understand that some cuts will be unpopular, and I think most members of Congress agree, but just like many working families are having to make sacrifices in these tough times, the federal government must do the same.”
Altmire is not only concerned with America’s risk of defaulting, but he is also concerned for his constituents.
“If we don’t do something soon, we risk not only America’s fiscal ‘image,’ but we threaten the livelihood of our so many people,” Altmire said. “Everyone, including me, is ready to take the hard votes that we need to take to get this job done and put us on a better fiscal path, but neglecting to do that just to put on a good political show would do real damage to this country on many fronts.”
Rep. Sheila Jackson Lee, D-Texas, agrees with Greenstein stating that the Tea Party plan is extreme. She is concerned with investment in our future and handicapping those who need vital services that would be cut should the bill pass.
“What about the 37.5% of the debt being the Bush Era Tax Cuts? Tax cuts of which this bill and any of your negotiations don’t in anyway suggest revenue…So today [Republicans ] come to the floor of the House with a cut, cap, and balance…I have a new name for the bill: Tap Dance Around the Question of Revenue and Lifting the Debt Ceiling,” Jackson said on the House floor. “It’s the tap dance loser’s club. The losers are seniors and young people and those who need Social Security and those who are disabled.”
Jackson expressed the need for education and infrastructure and worries that our future is being gambled away from the brinkmanship surrounding the debt ceiling debate. She questions the fairness of the Tea Party plan, expressing that it leaves out billionaires and corporations and unfairly targets the American poor.
“What do we need? ‘Not the Cut, Cap, and Balance’ which in no way invests in America; it no way ends the loopholes that are prevailing. It will block the United States Congress from closing loopholes from those who make billions of dollars every three months,” Jackson said. “We need innovation, infrastructure, and education. That’s jobs. I don’t want to see your children’s opportunity [slip] by closing elementary and high schools and disallowing them from going to college. That is what this bill is, not the cut, not the cap, not the balance.”
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