I haven't been focusing on the debt ceiling deal going on in Washington, mostly due to the epic phone hacking scandal in the UK. However, the deal is incredibly important for the future fiscal health of the US (and therefore the world), so I figured it's about time I started paying it some attention.
I've been ploughing through as much of the detail as possible, and to save everyone lots of time, I've found what looks to be the most succinct explanation of exactly what is going on between the Democrats and Republicans. Here's Matt Taibbi boiling down the two sides of the argument:
We’re seriously talking about defaulting on our debt, and cutting Medicare and Social Security, so that Google can keep paying its current 2.4 percent effective tax rate and GE, a company that received a $140 billion bailout en route to worldwide 2010 profits of $14 billion, can not only keep paying no taxes at all , but receive a $3.2 billion tax creditfrom the federal government. And nobody appears to give a shit. What the hell is wrong with people? Have we all lost our minds?
Yes folks, that's what it comes down to. The Republicans are threatening economic Armageddon if the Democrats do not include gigantic tax breaks for the mega wealthy in a potential deal. The GOP is parading itself as the party of fiscal responsibility, maintaining that the US must cut social spending in order to balance the budget. This is massively hypocritical given their track record in power (Bush ran up record deficits while his party stayed mute), and completely useless when it comes to actually doing something about economic recovery. Cutting funds for disabled people will not magically kick start the economy and boost production - government spending can do that, but given the GOP's ideological resistance to anything that comes from Washington, they are refusing to acknowledge it. Instead, they are holding the country ransom by refusing to play ball with the President, pretending they care about debt, and pretending they are doing what is in the country's best interest.
At the end of the day, here's what the two possible outcomes might look like. Writes Paul Krugman:
If it’s a Republican sweep, they will quickly dissipate any spending cuts with another round of tax cuts. If Democrats hold the White House and possibly even regain the House, they might conceivably turn to a solution that makes sense.
If the Republicans win, the economic recovery will take that much longer, giving them ammunition over the President in the upcoming election. So expect them to hold tight and aim to make the President blink first.