ONTD Political

Republican Game of Chicken

10:25 pm - 07/11/2011

Shame on them

The Republicans are playing a cynical political game with hugely high economic stakes

Jul 7th 2011 | from the print edition

IN THREE weeks, if there is no political deal, the American government will go into default. Not, one must pray, on its sovereign debt. But the country will have to stop paying someone: perhaps pensioners, or government suppliers, or soldiers. That would be damaging enough at a time of economic fragility. And the longer such a default went on, the greater the risk of provoking a genuine bond crisis would become.

There is no good economic reason why this should be happening. America’s net indebtedness is a perfectly affordable 65% of GDP, and throughout the past three years of recession and tepid recovery investors have been more than happy to go on lending to the federal government. The current problems, rather, are political. Under America’s elaborate separation of powers, Congress must authorise any extension of the debt ceiling, which now stands at $14.3 trillion. Back in May the government bumped up against that limit, but various accounting dodges have been used to keep funds flowing. It is now reckoned that these wheezes will be exhausted by August 2nd.

The House of Representatives, under Republican control as a result of last November’s mid-term elections, has balked at passing the necessary bill. That is perfectly reasonable: until recently the Republicans had been exercising their clear electoral mandate to hold the government of Barack Obama to account, insisting that they will not permit a higher debt ceiling until agreement is reached on wrenching cuts to public spending. Until they started to play hardball in this way, Mr Obama had been deplorably insouciant about the medium-term picture, repeatedly failing in his budgets and his state-of-the-union speeches to offer any path to a sustainable deficit. Under heavy Republican pressure, he has been forced to rethink.

Now, however, the Republicans are pushing things too far. Talks with the administration ground to a halt last month, despite an offer from the Democrats to cut at least $2 trillion and possibly much more out of the budget over the next ten years. Assuming that the recovery continues, that would be enough to get the deficit back to a prudent level. As The Economist went to press, Mr Obama seemed set to restart the talks.

The sticking-point is not on the spending side. It is because the vast majority of Republicans, driven on by the wilder-eyed members of their party and the cacophony of conservative media, are clinging to the position that not a single cent of deficit reduction must come from a higher tax take. This is economically illiterate and disgracefully cynical.

A gamble where you bet your country’s good name

This newspaper has a strong dislike of big government; we have long argued that the main way to right America’s finances is through spending cuts. But you cannot get there without any tax rises. In Britain, for instance, the coalition government aims to tame its deficit with a 3:1 ratio of cuts to hikes. America’s tax take is at its lowest level for decades: even Ronald Reagan raised taxes when he needed to do so.

And the closer you look, the more unprincipled the Republicans look. Earlier this year House Republicans produced a report noting that an 85%-15% split between spending cuts and tax rises was the average for successful fiscal consolidations, according to historical evidence. The White House is offering an 83%-17% split (hardly a huge distance) and a promise that none of the revenue increase will come from higher marginal rates, only from eliminating loopholes. If the Republicans were real tax reformers, they would seize this offer.

Both parties have in recent months been guilty of fiscal recklessness. Right now, though, the blame falls clearly on the Republicans. Independent voters should take note.

cpip 12th-Jul-2011 02:42 am (UTC)
Waiting for The Economist to be slandered by the American Right as a tool of effete European socialistic cowards in 3... 2... 1...
superfan1 12th-Jul-2011 02:54 am (UTC)
By the comments on the site below. I seen it already happen already. *lol*
rock_bottom 12th-Jul-2011 03:01 am (UTC)
rock_bottom 12th-Jul-2011 03:02 am (UTC)
Thom Hartmann has been saying this for ages. The Republicans will crash the economy to get the White House.
browneyedguuurl 12th-Jul-2011 03:39 am (UTC)
Basically. They even said once Obama got elected that their priority was to get him out of the WH. Not the economy, wars, education, enviroment, etc, etc. They disgust me!
rock_bottom 12th-Jul-2011 04:36 am (UTC)
Yes. Mitch McConnell is still saying that's their #1 priority... making Obama a one termer. They don't care about this country or its citizens; unless of course one is above the millionaire income bracket. I agree with you, but it's not only disgusting, it's fucking treasonous IMHO.
windy_lea 12th-Jul-2011 05:14 am (UTC)
I agree with you, but it's not only disgusting, it's fucking treasonous IMHO.

MFTE. They're endangering the country in the hopes of gaining control of it. Any politician who will do that so blatantly should be barred from pretending to represent voter interests. (That is, the fuckers shouldn't be allowed in office, because this is much more treasonous than the political criticism they gripe about.)
(no subject) - Anonymous
sephystabbity 12th-Jul-2011 03:25 pm (UTC)
Except they won't. Fucking rich people just get richer. The people who suffer will be the ones doing an honest 9-5 job that pays the bills.
___closetome 12th-Jul-2011 07:53 pm (UTC)
Not all tea party people are rich though, a lot of them are middle class. They've been convinced that rich people paying taxes is like slavery and that someday they can be rich too, which is bullshit obv.
sephystabbity 12th-Jul-2011 03:24 pm (UTC)
They don't care. All they care about is making sure that the government fails while Obama is president. Because that's what history will remember.

Fucking repubs.
aviv_b sarcasm alert12th-Jul-2011 03:44 pm (UTC)
Well everyone knows the Economist is an elitist rag.
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