The nation's $14.3 trillion debt ceiling has to be raised, and congressional Republicans are demanding huge deficit reduction concessions in return for raising it. Their unreasonable demands are putting America's economic recovery at risk. Even getting close to the date when the nation is expected to run out of money to pay its debts — Aug. 2 — may spook the markets and plunge the country into a double-dip recession.
If the nation were led by two responsible political parties, members of both parties would use this opportunity to negotiate a package of spending cuts and tax increases to start lowering the federal deficit. But Republicans are holding the debt ceiling vote hostage to their goal of trillions of dollars in spending cuts. Last week, Republican House Speaker John Boehner said flatly that "there will be no debt limit increase without serious budget reforms and significant spending cuts — cuts that are greater than any increase in the debt limit."
Boehner is playing a game of chicken, daring Democrats to accede to a Republican wish list or let the economy fall off a cliff. He is being pressured by the tea party movement, which doesn't seem to appreciate the spiral of misery that would result if the U.S. defaulted on its debt. Rather than appease this unreasonable base, Boehner should be educating his tea party supporters that spending cuts alone will not erase the deficit — at least if the nation is to keep its promises to seniors and maintain a viable military.
Members of both parties have suggested that a way out of this partisan deadlock is to agree to some kind of triggering mechanism. President Barack Obama wants a "debt fail-safe" trigger that would cut spending and eliminate popular tax breaks for individuals and corporations — such as ending billions of dollars in tax subsidies to oil companies — if by 2014 the debt is not brought under control. Republicans are insisting on automatic across-the-board spending cuts only and already have refused to end the tax give-aways for oil companies.
But triggers on federal spending that lead to deep cuts in popular programs could be window dressing at best. Congress inevitably ignores them. In 1985 Congress passed Gramm-Rudman-Hollings, named after its Senate sponsors, designed to get the nation to a balanced budget either through political will or automatic across-the-board spending cuts. Congress used budget tricks and devices to evade the law.
Still, a reasonable package of modest spending cuts and tax increases with automatic triggers could be the best way forward. The best hope for this may come from a bipartisan group of senators known as the "Gang of Six" (although now with the defection of Sen. Tom Coburn of Oklahoma it may be down to five) who have been negotiating for months on ways to achieve long-range deficit reduction. Their recommendations are likely to include reforms that are distasteful to both parties, but nothing on the order of what Boehner is demanding as a condition of raising the debt limit.
As time ticks by, America's good credit is needlessly at risk. The time for posturing is over. Democrats and Republicans should negotiate in good faith, raise the debt ceiling and agree on a combination of spending cuts and tax increases that would take effect if they cannot reach broader agreements on reducing the deficit.