The Debt Ceiling - A Ticking Nuclear Time Bomb

Welcome to Politics Bites, where every afternoon at It's A Free Country, we bring you the unmissable quotes from the morning's political conversations on WNYC. Today on the Brian Lehrer Show, Jonathan Alter, Bloomberg columnist, MSNBC analyst and the author of The Promise: President Obama, Year One, talks about the repercussions of failing to raise the federal debt ceiling.

The deadline for increasing the debt ceiling expires in less than a month--on August 2. The federal government has essentially already spent the money and Treasury Secretary Tim Geitner is saying default would be devastating on the American economy.

Yet Republicans in Congress are refusing to expand the ceiling unless draconian cuts are made to entitlement programs. Democrats won't agree to those cuts unless taxes on the wealthy are raised and tax loopholes for corporations closed. Despite the lack of alarm in American homes, Alter compared the prospect of the government defaulting on U.S. debt to a calamity on the scale of a ticking nuclear time bomb.

We've already spent this money so to not raise the debt ceiling is the height of irresponsibility. And you have certain Conservatives who are saying we should just go ahead and not raise it, and pay some interest and other essential payments and otherwise risk default, which just is insane! There is a flight from reason here and common sense that is truly alarming.

Alter said domestic and international markets will crater in the next three weeks if the government doesn't cross this impasse soon, and that means the economy will sink more and the deficit will get worse.

The inability of the Republicans--and we might as well not mince words--they are the ones impeding a settlement, the ability of them to do the financially, fiscally responsible thing, is almost breathtaking at this point.

Alter says Congress needs to institute triggers and caps that in 2013 would automatically create very draconian spending cuts and tax increases if debt targets aren't met. That's the type of compromise reached in the 1990s when the deficit was also quite high. What a deal relies on, Alter said, is a few Republicans bucking the lobbyist Grover Norquist, who former Wyoming Senator Alan Simpson recently described as the most powerful man in America, including the President.

Most of these Republicans signed a pledge written by Grover Norquist of American for Tax Reform that prevents them for voting for any tax increase and Norquist defines increase as the closing of loopholes, because that in his mind, and he has a lot of power, is effectively a tax increase.

Alter doubts that Congress will enact major tax or entitlement reform in the next two weeks, but said getting past the August 2 deadline doesn't mean ignoring reform.

Anybody who takes a hard look at the budget knows that there has to be very deep cuts including reform of entitlements, which is something liberals don't like to face up to. They need to be mended, I don't think they need to be ended, the way the Ryan plan does to Medicare, privatized, but they need to be significantly reformed.

The scariest thing, Alter said, is that the parties seem very far apart at this point--no where near agreement. In that case, it may be a hot, tough August.