As the U.S. moves closer to its defaulting deadline, and the Democrats, Republicans and the latter’s Tea Party fringe continue to posture and manoeuvre, it looks increasingly like Washington is playing an extended game of make-believe. President Obama wants a “big deal” done in time for the Aug. 2nd deadline (ie: when the U.S. would run out of money). Obama’s plan calls for tax increases on the richest individuals and corporations in exchange for cuts and reforms to the U.S.’s expensive, unfunded entitlement programs — a herd of Democratic sacred cows if there ever was one. The Republicans consider that icky, since many of them rode into Congress pledging no tax hikes. Obama’s plan would be devastating politically, which is why senior Republicans are musing about Plan B — allowing the President to hike the debt ceiling on his own authority. It’s moral cowardice writ large: We’re going to let the Democrats win, the Republicans are saying, but we’re not going to be like officially to blame. Sort of like forfeiting the game to deny the other team a chance to win on the ice, isn’t it?
Oh, and there’s this: Even the Big Deal that’s being mused about, the one the Democrats consider a huge sacrifice and the GOP is having trouble even swallowing, is a joke. Four-trillion-dollars in savings over a decade sounds like a lot, until you remember that the U.S. is looking at deficits totalling $9.5-trillion over that same period. Obama’s Big Deal, so big the GOP can’t take it, solves roughly 40% of the problem.The Republican’s so-called Ryan Plan also foresees continuing deficits a decade out, though much smaller than anything that Obama would produce (with a correspondingly lower debt-to-GDP-percentage).
This is why the Tea Party is so rightly frustrated. All the brinkmanship, the financial uncertainty and the market turmoil that could be unleashed … is a fraud. Obama and the Congressional Republicans are whistling a merry tune while shuffling the Titanic’s deck chairs as it steams past a graveyard.
The Tea Party Plan addresses the real issue: The U.S.’s addiction to debt-fuelled spending, regardless of its sustainability. It proposes immediate, steep budget cuts as a condition for raising the debt ceiling, and also calls for a Constitutional amendment mandating balanced budgets. While they don’t call for specific cuts, balancing the budget in the short-term would mean cutting U.S. federal spending in half (assuming no new revenues were raised, which is a given, considering the Tea Party’s opposition to new taxes).
These are the kinds of cuts the U.S. needs to be considering. Whether it means hacking away entire departments of the federal government, slashing military spending or dramatically reforming its entitlement programs (or more likely, some combination of all the above and much more), it will hurt, but it has to be done. The chickens have come home to roost, and the U.S. can’t afford to fight over the debt ceiling every few years because it can’t control its spending. The Tea Party is 100% right about that.
But Obama will win the rhetoric game. He’s already out there, talking about how he’s willing to sacrifice lots to get a deal. People are scared that Republican stubbornness might be about to trigger a new financial crisis. The markets will become more unsettled as the deadline draws nearer. And it remains far from certain if even Americans who’d count themselves as budget hawks would be willing (or able) to endure the kind of austerity the Tea Party is calling for. If Obama can raise the debt ceiling, with GOP co-operation or merely complicity, he’ll look like a hero to many, and will spend the next year slamming the GOP for having taken the economy to the brink.
That’s why being right won’t help the Tea Party. At least until the next time the U.S. runs out of cash. Unless things change, it won’t be long.
• Email: mgurney@nationalpost.com
Source: National Post
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