The debt negotiations – again!

We are a week away from the Aug 2 deadline to raise the debt ceiling, and still there is no agreement. Republicans still insist they will not support any new taxes, and Democrats still insist they will not support any modifications to entitlements. President Obama and Speaker Boehner apparently have been close to agreement with each other several times, but their their respective parties in Congress have apparently been unwilling to go along with whatever they agreed to, and so the negotiations have stalled repeatedly.

So from a larger perspective, what is really going on here?

The Huffington Post is certainly correct that this is a “manufactured” crisis – Congress has raised the debt ceiling repeatedly with little or no fuss, and could do so again. On the other hand, judging by President Obama’s budgets since he took office, the administration has no intention of cutting government spending, and has in fact increased it sharply since Obama took office. So those members of Congress who understand, quite correctly, that government spending MUST be sharply reduced, and soon, have to find some way, some leverage, to bring the administration to the negotiating table. The debt limit is about the only opportunity they have, since negotiations on the budget itself seem never to produce enough leverage.

As to the administration’s insistence on including more revenue in any final deal, I find this unconvincing. The only reason to ask for more revenue is to postpone some of the reductions in government spending that are absolutely necessary, now that the government is borrowing almost half of the money it spends. What is really needed is not more revenue (and taxing the rich more, satisfying as that may be to the Democratic base, isn’t going to produce enough new revenue to make any difference to the problem), but more spending reductions.

As to the Democratic party’s insistence that no entitlements be touched, that is either pure politics or pure fantasy. It is financing the entitlements that is driving the nation to bankruptcy, and so it is to entitlements we must look to cut spending. Of course it won’t be popular – having given the kids candy it will never be popular to take it away again – but we simply cannot afford the current entitlements, especially as the population ages.

As to the administration’s insistence on a large increase in the debt ceiling, so that this issue won’t have to be revisited before the next election, that is pure politics. President Obama would certainly prefer not to go through this bruising battle again during election season, but in the end he will probably be forced to take a short-term extension anyway.

All in all, although both sides have been acting (in public, at least) like petulant children, I think the Republicans are right to press this issue. Some of them may indeed be naïve, or ideological purists, and be pressing it for the wrong reason, or just to satisfy the conservative base. Nevertheless, the nation MUST reduce federal spending by a huge amount (at least $10 trillion over the next 10 years), far more than has been mentioned in any of the negotiations thus far, and this administration has to be driven to at least begin to make the cuts, however painful the political process may be.