Talks on raising the debt ceiling have broken down completely. Both Republicans walked away today, because the Democrats have nothing to say.
Where the debt ceiling stands
The US debt ceiling is now about $14.29 trillion. Technically the government hit that limit in mid-May. Treasury Secretary Tim Geithner said that he could move some funds around to avoid actually borrowing over the legal limit. But he could do that only for another 11 weeks. That 11 weeks runs out on August 2.
The debt ceiling talks
Since early May, Vice President Joe Biden has run several meetings of top Democrats and Republicans to negotiate a rise in the debt ceiling. The problems:
- The Republicans insist on cutting spending by at least as much as the debt ceiling would rise. The Democrats won’t offer any cuts. And ever since Rep. Paul Ryan suggested turning Medicare into a voucher plan for persons now younger than 55, the Democrats have accused them of trying “to kill Medicare.” After that, the Republicans asked the Democrats where they would cut, and the Democrats have said nothing—or perhaps, “nowhere.”
- The Republicans have also refused to raise taxes, and especially to raise income tax rates. Democrats have proposed raising the top marginal tax rate as high as 70 percent—what it was during the Jimmy Carter administration. The Republicans have said flatly that no such measure would ever pass the House.
Rep. Eric Cantor (R-VA) today dropped out of talks aimed at raising the debt ceiling. Photo: US House of Representatives
This morning, House Republican Leader Eric Cantor (R-VA-7) said that he would not attend today’s meeting of the Biden group, the eleventh so far. Late this morning (June 23), he said why:
[T]he Democrats continue to insist that any deal must include tax increases. There is not support in the House for a tax increase, and I don’t believe now is the time to raise taxes…
Bottom line: unless and until the Democrats stop demanding tax increases, Cantor has nothing further to discuss. He said that President Obama needs to say whether the Democrats will keep demanding tax increases—or not.
Then, close to noon today, Senate Republican Whip Jon Kyl (R-AZ) also pulled out of the Biden group. He and his boss Mitch McConnell (R-KY) said this:
The White House and Democrats are insisting on job-killing tax hikes and new spending. That proposal won’t address our fiscal crisis, our jobs crisis, or protect and reform entitlements. And a bill with new spending and higher taxes would fail with bipartisan opposition – as it should. President Obama needs to decide between his goal of higher taxes, or a bipartisan plan to address our deficit. He can’t have both. But we need to hear from him.
This is the first time that any Republican has said, officially, that President Obama wants to raise taxes more than anything else. And they’re probably right. Remember: Obama said during his election campaign that the Constitution is “a charter of negative liberties.” And he has always felt that the Constitution ought to call for “redistribution of wealth.”
What do the Democrats say?
They insist that the government has to raise taxes, and Cantor and Kyl just didn’t want to be brave about it.
Aside from two senior Democratic leadership employees, no one is saying anything officially. (Though House Democratic Whip James Clyburn, D-SC, told Fox News anchor Neil Cavuto how much he resented “millionaires enjoying tax cuts.”) The President has said nothing. Everyone will wait for him to say something, because:
- Cantor and Kyl have both said that he must.
- Obama has said before that he wants to raise taxes on those more fortunate than typical members of his base.
- Obama is the head of the Democratic Party, as any President is the head of his party.
Erick Erickson of RedState.com said that someone needed to yank Jon Kyl out of the negotiations, in fear that he might give away the store. He also said that the entire process was pointless, because both sides seem to believe that cutting a several-trillion-dollar budget by a mere $2 billion was “a serious deal.”
Erickson was worried about the “Gang of Six.” But word comes now (4:10 p.m.) that at about 3:00 p.m. EDT, even the Gang of Six fell apart.
If the debt ceiling does not rise, what then?
What then? Why, the government would have to bring some of its programs to a roaring, screeching halt. The government keeps talking about a “default” on the debt. The only thing that the government would have to default on, would be its pay roll, wealth-transfer payments, or a little of each. No one has yet proved that the government would default on payments on Treasury bills, notes or bonds.
The Tea Party movement has said repeatedly that they see no reason whatsoever to raise the debt ceiling. They have been afraid that the Republicans would sell them out and raise it anyway. Today that outcome seems less likely.
Featured image: a Weimar Republic citizen wheels a barrow full of near-worthless Reichsbanknotes to the corner grocer to buy a loaf of bread.