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The Debt Ceiling - A Ticking Nuclear Time Bomb

Tuesday, July 05, 2011

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.

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Comments [26]

Love the Hypocrisy

Losing my home to FRAUDCLOSURE on August 2... thank you, Fannie Mae and HAMP for stringing me along for 3 years with false hope. Now can someone please tell me how to raise my family's debt ceiling? We have 3 children, and defaulting on our debt will have cataclysmic repurcussions for 5 people. Big deal you say? Guess what- this is happening to MILLIONS of families, RIGHT NOW. WHO WILL RAISE OUR DEBT CEILING????????????????

Jul. 08 2011 09:55 AM
Louis Taffera from South Salem, NY

The last caller to Jonathan Alter on Brian Lehrer's show gave the standard Tea Party argument that we (federal government) are living beyond our means and increasing the total national debt to unsustainable levels. Most people, including Democrats, don't take issue with the problem. It is the solutions where disagreement arises, and maybe also the cause of the present problem. First a comment about the cause of the present problem (as opposed to a more long term problem with entitlement growth): The caller, in passing, touched on it when he said that we (government) have to "pay as we go". That is exactly what occurred during the Clinton administration when the Democratic President and Republican Congress followed "pay-go" rules requiring that any spending bill had to be matched by revenues to pay for it or any tax cut had to be matched by spending reductions. This resulted in budget surpluses in the last years of the Clinton administration and a downward trend in the national debt when George Bush took office. An important fact which the caller and all Republican fiscal hawks ignore today is a comparison of the national debt at the end of the last fiscal year of the Clinton Administration ($5.8 trillion) with the number 8 years later at the end of the last fiscal year of George Bush’s and the Republican controlled Congress’ fiscal management ($11.9 trillion) - doubling in 8 years. The cause…ignore “pay-go”. We had two tax cuts totaling almost $2 trillion with fantasy projections of 10 year surpluses which is why the “Bush” tax cuts were set to expire at the end of 2010, an unfunded Medicare prescription drug benefit, 2 unfunded wars and a tripling of the defense budget, all with no offsetting revenue. To be fair there was also a recession which reduced tax collections, but there was no serious effort to adjust fiscal policy to deal with it. The Republican attitude was clearly stated by Vice-President Cheney when he said “Deficits don’t matter.” Of course the caveat to the comment is that they don’t matter when Republicans are in power, but they certainly do when Democrats control. With respect to solutions: David Brooks column in today’s New York Times “The Mother of all No-Brainers” addresses the problem. We need compromises between Democrats and Republicans to find a balance of spending cuts and revenue increases. Democrats have come a long way in agreeing to a ratio of 3 to 1 in spending cuts vs. revenue increases to start getting the deficit under control. The problem is that, as David Brooks points out, there is no responsible Republican Party addressing the issue, just what he calls an “odd protest movement” which is letting its fanaticism get in the way of governing. The consequences will be disastrous for all of us, not just the Republican Party as Brooks suggests. Jonathan Alter was correct in all his comments. The last caller gave us ideology and no solutions. Sounded like a PR guy for today’s Republican Party.

Jul. 05 2011 03:18 PM
JT

@Martin Chuzzlewit
Once again, that corp jets mention is an example of how the right thinks it's important to maintain the breaks for the wealthy while sticking it to the poor. So if someone is on the verge of losing their health coverage, or their local school is facing budget cuts, the least a rich guy can do is give up the tax break on his jet. It's called sharing the burden. It seems that to you giving up the jet is an unreasonable burden. We understand that. And we all know that everything was going great under Bush. It must have been because the right never complained. "Deficits don't matter" was one of the mantras.

As for class warfare, the right is a master at it. They have rubes like you believing our problems are all caused by gay marriage, abortion, immigrants, non-Christians, liberals, prayer in schools, etc.

Bush would have flown more but he spent 40% of the year on vacation in Texas. Besides that I'm sure he never flew on Air Force One.

Jul. 05 2011 11:47 AM
Stan from West Long Branch, NJ

Brian,
You can do better and you must do better.
NOT ONE WORD ON DEFENSE SPENDING IN A DISCUSSION ON BUDGET DEFICITS?!
Where is our money going - where has it gone - $8000 per second to Iraq $8000 per second to Afghanistan in two horrible wars.
And we all know that every congressional district has their fingers in the defense budget - an engine here, a jet fighter there -

Please focus this discussion properly.

Jul. 05 2011 11:16 AM
Melissa from Hoboken

Please point out that the Republican congressional leadership under the George W Bush administration raised the debt limit 7 times without any fuss. The debt ceiling nearly doubled from $6.4 T to $11.3 T from 2002 to 2008 Where is the principle these Congressional Republicans claim to be standing on? They've already voted for debt ceiling limits.

Jul. 05 2011 10:47 AM
Judith from Brooklyn

Where were all these budget-conscious Republicans when they ran up the debt with 2 unpaid-for wars?

Jul. 05 2011 10:33 AM

John from NYV
because tax receipts have never been lower!
The we in the states pay the lowest amount of taxes in the G7

Jul. 05 2011 10:32 AM
madmen

Oh, lord, now Jonathan Alter wants to "reform" entitlements.

Is there no end to this vacuous orthodoxy? Are leftists simply banned as guests from WNYC?

Jul. 05 2011 10:32 AM
Tim from NJ

Brian,

How about asking the callers that are so excited about cutting the budget what services/benefits they receive they are willing to give up.

Jul. 05 2011 10:29 AM
Ansi from Columbia County, NY

All this business about the debt limit is just lip-flapping. Do we think that Wall St., the biggest contributor to Congress, is going to stand by and let bought-and-paid for politicians damage the global financial system? As the deadline nears, the Wall St. lobbyists will read them the riot act. They will toe the line.

Jul. 05 2011 10:29 AM
Guy

Oh, I see. Jonathan starts the segment with words like "catastrophe" and "unprecedented." But when a caller makes his points that sound eerily like tea party points his convictions are attacked.

Jul. 05 2011 10:29 AM

JT from LI
lets have a tax on abortions. then everyone can claim victory

Jul. 05 2011 10:28 AM
jgarbuz from Queens

The question of how much debt an individual, or a nation can take on, depends on what the money has been used for. GEnerally, money is used either for (a) consumption, that is buying things that produce nothing in the future, or (b) investment, such as buying machines or computers or whatever can be used to increase production to pay off debt later down the line.

Our nation is in high debt due to high consumption, and not enough domestic investments in what can create wealth in the future.

Jul. 05 2011 10:28 AM
madmen

So Jonathan Alter would have us believe that Pete Peterson's paid shill -- David Walker -- is an honest broker. Even more to Alter's taste, Walker is "negotiating" between two competing orthodoxies, neither of which make any sense.

Folks, who don't cut your way out of a recession. In the short term, we have to spend more, not less.

Amazing that people who have been wrong about everything -- including Jonathan Alter -- are looked to as sages.

Let's have chapter and verse -- let Jonathan Alter prove that his policy proscriptions have worked in the past.

Jul. 05 2011 10:27 AM
Martin Chuzzlewit from Manhattan

First Caller....BRAVO !!!!!!!!!

We wouldn't let our families get into this much debt!

Jul. 05 2011 10:26 AM
guy catelli from America

i'm glad that Jonathan Alter has figured out the problem: the Republicans are "insane" (or a similar word) for refusing to allow the Federal government to take a larger share of GDP than it is already taking.

Jul. 05 2011 10:24 AM
Beth from Jackson Heights

HOW COME NOBODY IS TALKING ABOUT THE TAX CUTS IN THE RYAN BUDJET!

Jul. 05 2011 10:24 AM
Cory from Reality

The debt ceiling is an unconstitutional violation of the 14th Amendment. The Supreme Court case makes that clear. Ignore the debt ceiling and tell the Republicans to pound sand.

Jul. 05 2011 10:20 AM
John from NYV

I am confused. The US is a rich country. Why do we have any debts at all? If we can't pay as we go now, what is the plan to do so in the future?

When I took on student loans, it was with the prospect of earning more later. Do we have such a plan now?

China is a poor country and has no net debt. Why do we?

Jul. 05 2011 10:18 AM
jgarbuz from Queens

Japan has a national debt THREE TIMES the size of its annual GDP, and yet I don't see Japanese starving, even the wake of the great tsunami catastrophe.

My question for your guest is, who determined that national bankruptcy is officially determined when your national debt reaches the size of your annual GDP? Who made this determination? HOw is our overall national debt compared to Japan and some of the major European economies?

Jul. 05 2011 10:18 AM
Laura Collins from New Yor City

I love Brian Lehrer's program, but this morning I heard something that startled me.
Brian called the Democratic Party the Democrat Party. A small detail but, it's a leftover from the Bush administration and was intended as a put down.
Let's not change the language because of Bush.
Thanks.

Jul. 05 2011 10:16 AM
Liam from East Elmhurst

Is there (can anyone tell me) a website that accurately summarizes how much and how reliant corporate America is reliant upon the government for help?
I keep hearing cut social programs as I watch the stupid kids with ash for brains head now where in my neighborhood. It seems they are neglected and the future is in jeopardy.
Please, let me know.

Jul. 05 2011 10:15 AM
jgarbuz from Queens

The question of whether or not wealth should be "redistributed" or just allowed to "trickle down" is a very ancient one, going back to at least Biblical times, and probably long before that.
In the Biblical prescriptions, the Prophets railed against cheats and those who shortchanged workers, and on those who tread on the poor. The prescription was charity - which is considered "justice;" and to allow the poor to "glean" from the fields, meaning to leave some crumbs on the floor for them; and a legal system that did not discriminate in favor of either the rich or the poor.

Now the question of which tax system is better for the economy as a whole, i.e., a "flatter" system or a more progressive system, the evidence for either side is simply inconclusive. Historically, both ways have been tried from time to time, and reasonable arguments can be made for both. There is no way of putting an economy into a laboratory and making double blind experiments. As Roosevelt said, we have to try everything, and see what works best in any give time.

Jul. 05 2011 10:13 AM
Martin Chuzzlewit from Manhattan

JT - The Axelrod/Obama strategy to pit groups against each other has sadly been working with rubes like you. If this leader of the worst recovery since the Great Depression (41 months versus the 16 months average) is given another 4 years to continue proving his ineptness, it will be because they successfully convinced the average family that all of their struggles are because of a handful of Greenwich hedgefund guys and extended depreciation write downs on a few dozen corporate jets at Teeterboro Airport. What a cheap scam. This is Presidential leadership???!!!!

...and by the way, guess who flies in the biggest corporate jet in America to come for Broadway shows with Michelle...or to go golfing in Hawaii?

Jul. 05 2011 09:56 AM
JT from LI

@Martin Chuzzlewit
"is all because of "CORPORATE JETS"!!!" - Maybe it's because of abortions, which is what the republicans have been focused on this year. The point he's making is that the right is determined to keep benefits for the rich while sticking it to the poor. But I can see how that point goes right over your heads.

Jul. 05 2011 08:45 AM
Martin Chuzzlewit from Manhattan

So, now we know that the reason that there are so few jobs...... a skyrocketing deficit...... and a moribund, stagnant economy that Obama (and his now exiting/exited pathetic "economic team") totally fumbled......is all because of "CORPORATE JETS"!!!

Oy, who knew?

(He probably regrets that he let Axelrod persuade him to use that laughable talking point 6 times in one appearasnce. "Just keep repeating it, Barack, at even the most tangential of opportunities.")

Jonathan Alter, administration lapdog extaordinaire, can spin this all he wants. This is NOT a President that any sane electorate would return for 4 more years of class warfare instead a better life for ourselves and our kids.

Jul. 05 2011 07:56 AM

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