Vice President Joe Biden will meet with Republican leaders this week to resolve the issue of raising the debt ceiling. Republicans say they will not vote for any increase in the debt limit unless it is matched by an equal amount of spending cuts. Democrats are willing to agree on spending cuts if they are offset by increases in revenue, IE: tax increases. Republicans say everything is on the table BUT tax increases. And so it goes, on and on and on…
According to the Associated Press, Federal Reserve Chairman, Ben Bernanke said Tuesday that the US debt ceiling should not be used as a bargaining chip to force budget cuts, and not raising it could cause “severe disruptions” in financial markets and worsen the economy. Bernanke said that even a short delay in making payments on the nation’s debt would damage the dollar and raise serious doubts about the nation’s creditworthiness. Using the debt limit deadline to force some “necessary and difficult fiscal policy adjustments” is “the wrong tool for that important job”. Standard & Poors has already stated that the nation’s credit rating is in jeopardy due to a lack in confidence that Congress will reach a solution by the August 2nd deadline.
As always, the real sticking point here is raising taxes. The Democrats want to the Republicans don’t. In this particular instance the Democrats seem to be on the right side of the issue.
There is simply no way to get out of the mammoth financial hole that we are in by merely cutting spending. The country is far too dependent on the programs whose cuts would still be insufficient to fix the problem. We need to increase revenue.
So where do we get it?
Middle class wages have declined over the past decade while corporations have earned record profits. Corporations earned profits of $1.7 trillion in 2010 alone. And while their profits have increased dramatically over the past decade; the taxes they have paid as a percentage of the country’s GDP has declined to just over 1%...the lowest ever.
Republicans argue that you cannot increase the tax burden on the very individuals who invest in the economy and create jobs. That would be a valid point if corporations were actually investing in the economy and creating jobs. But they are not. The unemployment rate currently stands at 9% and the economy is stagnant. Those corporations that line the Republican pockets are investing overseas and hiding their profits in foreign banks.
But this is what Congress does. They posture, threaten and argue until the eleventh hour. Then they do exactly what they knew they had to do months before.
Congress needs to raise the debt ceiling…period. Any failure to do so, thereby forcing the country to default on its financial obligations, is fiscally irresponsible and reckless. Once they have taken that vote they can then go about the business of reconciling the necessary spending cuts with the inevitable tax increases.