With only hours to spare, the government raised the debt ceiling yesterday and restored its honor as a nation that stands by its full faith and credit. Whether your impulse was to cheer or to weep, you had every reason.
The first impulse is to celebrate that a big majority of both houses of Congress decided in the end to be adults—that really was in question—and to put the nation’s well-being ahead of their political vanity and ideology. All of the Arkansas delegation, Senators Mark Pryor and John Boozman and Congressmen Rick Crawford, Tim Griffin, Steve Womack and Mike Ross, did what duty required and voted for the complicated agreement that raised the debt ceiling and permitted the government to pay its debts and meet its obligations to its citizens.
Crawford and Griffin had said early on that they had no problem in letting the government close up shop and renege on its obligations to its creditors, vendors and citizens. Griffin, apparently influenced by leaders of his own party and the alarm of the business community, came around gradually to say they would not let the country go into default, and Crawford surrendered on the final roll call. Crawford had said it was no big deal, which was an understandable attitude because he had welshed on his own debts a few years ago by declaring bankruptcy and it turned out very well for him.
Sixty-six Republicans in the House, mostly the tea-party class, wanted to take the government down, whatever the consequences. Ninety-five Democrats voted against the agreement in protest of the perilous parts of the debt deal—drastic cuts in discretionary spending that will reduce aid to American schools, cut benefits to many of the neediest citizens and end assistance for the unemployed.
But the debt deal and the votes on the debt ceiling are cause for relief, not for mirth. It should never have come to this—indeed, it never did in all our history or any other nation’s. The public debt, though serious, is not the country’s most grievous problem. Unemployment and a nearly growthless economy are. The debt-ceiling crisis has made those matters worse. The already anemic rate of growth slowed to a halt and joblessness went up when the markets and consumers saw that a cataclysm might lay ahead when the government hit the ceiling, first in May when the limit was technically reached and then on August 2, when the Treasury Department’s legerdemain with the books would reach its end.
The deal struck among leaders of both parties in both houses and President Obama does not require large immediate cuts in discretionary spending, and that is the good part. Obama insisted that the cuts not be immediate, that is in this or the approaching fiscal year, to give the economy more time to heal. Huge cuts in assistance to local governments, farmers, the national parks, regulatory agencies and medical assistance would drive the country back into recession, perhaps deeper this time than the one that hit the country in the winter of 2007-08.
A few people remember, by the history books if not personally, what happened in 1936, when President Roosevelt thought the country had recovered enough from the Great Depression to slash spending and move back toward a balanced budget. Unemployment had fallen from 24.9 percent when he took office in 1933 to 14.3 percent. After his budget retrenchment, it soared to 19 percent over the next year. It took the great stimulus of World War II to get us out of that recession.
Restoring the country to even the anemic economy of 2007 would do more than anything else to eliminate the deficits and forestall future debt limits. The government’s revenue from income and social-insurance taxes fell by nearly $600 billion a year in the economic collapse. That alone accounts for 40 percent of the deficit in each of the past four years. The economic collapse accounts for $2.3 trillion of the accumulated $14.3 trillion national debt. Getting back to the peak of the George W. Bush economy would make the deficits manageable. Going back to the full-growth economy of Bill Clinton would eliminate the deficits entirely. Remember that we had four straight years of budget surpluses.
Though Republicans continued to insist that the series of tax cuts for the wealthy and corporations between 2001 and 2004 are not responsible in any way for the deficits, the record unmistakably says differently. Some $500 billion a year of the deficits is a continuing reflection of those tax cuts. Even Congressman Griffin, a fierce defender of the tax cuts for the rich—he was a White House underling at the time—acknowledged in an op-ed article in the Arkansas Democrat-Gazette last week that federal revenues fell sharply between 2001 and 2007, but he tried to say that the recession and revenue shortfall were caused by the 9/11 attacks. Treasury records show that he was wrong about that. The recession started in March 2001, the month the big tax cut bill was introduced, and ended in October, the month after the 9/11 attacks. The economy began to grow modestly in October. No, the tax cuts and not 9/11 caused the revenue decline.
President Obama and Democrats tried to get a tax program included in the debt-reduction package: restoration of the 38 percent tax marginal rate for very high incomes that existed in the roaring ‘90s and closing tax loopholes for hedge-fund managers and others that reward companies for moving jobs out of the country. House Speaker Boehner seemed ready to strike a deal to make some tax legislation part of the deal with big spending cuts, but a rebellion in his party forced him to back down.
The president caught hell from his party for backing down on the taxes, but in the end he had no choice. Had he not, the country this morning would be in default and we would all face a much grimmer future. He was not in a celebratory mood when he signed the bill yesterday afternoon. Who could be? — Ernie Dumas
