Debt ceiling talks break down

A wheelbarrow of money to buy a loaf of bread. This is what Obama, with his fiscal cliff plan, threatens us with.
Print Friendly, PDF & Email

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:

  1. 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.”
  2. 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.

The collapse

Eric Cantor drops out of debt ceiling talks

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:

  1. Cantor and Kyl have both said that he must.
  2. Obama has said before that he wants to raise taxes on those more fortunate than typical members of his base.
  3. 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.

Editor-in-chief at | + posts

Terry A. Hurlbut has been a student of politics, philosophy, and science for more than 35 years. He is a graduate of Yale College and has served as a physician-level laboratory administrator in a 250-bed community hospital. He also is a serious student of the Bible, is conversant in its two primary original languages, and has followed the creation-science movement closely since 1993.

5 Responses to Debt ceiling talks break down

  1. Donald R Laster Jr says:

    Why would anyone expect anything else other than that the Progressives want to repeat the same policies that created our current problems and created the Great Depression.

    We need to be doing what Calvin Coolidge and “his” Congress did when they had a deal with a Depression in the 1920s. They reduced spending and taxes. The result – growth of industry and personal wealth. Progressives like Hoover and FDR prevented the economy from recovering after the 1929 crash.

    And I do not like the term “entitlements”. No one is entitled to be given money from the public treasury. People are only entitled to money from the public treasury if they are being paid for a service or product. Lets start calling these program what they are – WELFARE! And that is the responsibility of the people not the government. at any level.

    People need to look at real history.

    • John says:

      I agree. People do need to look at real history, starting with yourself, since you’re clearly ignorant of the facts.

      The Progressive party does not exist in any real sense in America. Also, it’s a poor label to use anyway. If they’re progressive, what are you? Regressive? What’s wrong with progress? We progressed into a society of religious tolerance, we progressed into a free society, we progressed into an automobile-owning society, we progressed into being a society capable of unsurpassed space exploration, and scientific progress keeps extending our lifespans. Progress seems to be a pretty sweet deal.

      It wasn’t government action, but rather government inaction, that caused the Great Depression, largely because it was deregulation of private industry that allowed private businesses, largely banks, to set up an economy built on top of a house of cards (similar to the crash of 2008). Herbert Hoover was only in office for eight months prior to the stock market crash. Also, he was part of Calvin Coolidge’s cabinet for something like 7 years before that. The Republicans elected him under the auspices that he would keep everything the same.

      Yes, Hoover did impose more regulation on private industry, but nobody can claim with a straight face that was the sole cause. Hoover’s inaction after the crash is part of what fueled the depression. FDR pulled the country back from the brink of complete destitution with The New Deal, although that didn’t work as well as it should have. Deficit spending, as foretold by Keynes, did wonders for getting the economy working again, and in a stable format. 1934 had showed the most growth, but also had the most deficit spending. 1935 did great until halfway through the year when FDR realized he was deficit spending, and started slashing spending. This caused a recession through the rest of ’35 and ’36, stopping in ’37 when he started deficit spending again. The Great Depression ended in 1939, but the economy didn’t really take off until FDR started arming in preparation for World War 2, again, through deficit spending paid for by sane taxation.

      Here’s a fact that cannot be stated enough: Since 1980, the US economy has doubled, but the median income is basically the same. Where did all that money go? To the super rich. In 1980, the wealthiest 1% had 10% of all income. Today, the wealthiest 1% has 40% of all income. That money has been used to buy the media, which has been used to drop tax rates on the super wealthy, so they can become wealthier. This is the cause of our deficit, not spending. I will repeat, this lack of taxation is the cause of our deficit, not spending. In the 1950s, the tax rate on the wealthiest 10%, was something around 90%, and everyone will agree that the economy was doing great at that time.

      See, the way that a circular economy works, is that in a bad time, the government spends a lot of money to get private industry moving again. Then the government avoids debt by collecting taxes on the business it creates, and immediately injects that money back into the system where it spurs additional growth. And on and on and on.

      Currently, the spending isn’t broken, yet, although it will be if it stops. The taxation, the re-uptake that powers the spending and the economy by extension, that’s what is broken. This has allowed a certain super rich section of society to take over politically, as well as caused our massive debt.

      We need to tax the super rich, if only to pay for things. Allow me to demonstrate:

      Imagine a pie, whatever flavor you like, that is between 4 and 5 inches in diameter. Each inch represents 10,000 dollars. This is the median household income. This is the majority of people make. If I guessed that you made around that amount a year, it would be a safe, if somewhat uneducated guess. By contrast, someone with 1 billion dollars, their pie is over a mile and a half in diameter. Currently, that 1% (which often has well more than just 1 billion) is only paying, on average, 17% in taxes. They have the money to hire a lot of accountants to drive down what they pay in taxes.

      Giant Corporations, the Kingdoms that generate the super wealthy, are even worse than the individuals in charge of them. GE pays nothing in taxes. A child buying a candy bar pays more than GE does in taxes. In fact, the Feds give GE money, which it uses to find more ways to avoid paying taxes.

      So in order to solve our debt problems, and not cause a massive recession, we have to tax the super wealthy (and corporations) at a sane (meaning higher) rate. This sort of basic economics is easily understood by children, but strangely, the average conservative just cannot seem to get their head around this fact.

      So it isn’t “progressives” that are trying to step up the same scenario that has destroyed the economy before, it’s the super wealthy, who refuse to pay their fair share of taxes.

      At this rate, looking at the political scenario in any terms other than Haves vs Have-Nots is part of the distraction that the Haves had engineers to keep the Have-Nots confused and keep themselves in power. You are, like me, a Have-Not. Joe the Plumber, he was a Have-Not who had the delusion that he was a Have (or that someday he could be). America ranks below many, if not most, other industrialized nations in measures of social mobility, but thanks to successful propaganda, a lot of Have-Nots hold the insane belief that they could be a Have.

      If the Have-Nots (you and me) are going to survive, and America by extension, the Haves must pay their fair share. This is simply a math problem. Claiming that the Have-Nots could solve the problem by simply working harder is perhaps the most idiotic response one could have to this situation. The Have-Nots are already working their fingers to the bone, but the Haves are the ones making all the money from it.

  2. Camille says:

    In my eyes the problem is currency and capital. We have laborers, food to feed the laborers, homes for the laborers, the laborers can work for the farmers and the builders, etc.

    We can’t do what needs to be done, though, because we are held hostage by people that have more of this “money.” It’s utterly meaningless, of course. You can’t eat it or make fuel of it. It does, though, allow a few people to accumulate capital by having others work for them and ransom them: “work my land, work my factories, or starve!”

  3. […] Debt ceiling talks break down […]

  4. […] Debt ceiling talks break down […]

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.