To Raise the Debt Ceiling, or Not To Raise the Debt Ceiling?

This chart clearly shows that raising the Debt Ceiling was not an issue for the GOP before Obama became President.

While President Obama is trying to negotiate a deal with the Republicans in the House and in the Senate on raising the debt ceiling, both parties are actively voicing their opinions in an attempt to sway public opinion.  The Republican Party hold to their stance that with a $14 trillion National Debt, we must cut spending to balance our budget; this is the only way to restart our economy.  The Democratic Party hold to their stance that with a $14 trillion National Debt, we must raise taxes to balance our budget; this will enable the government to work towards balancing our budget without thrusting hardships upon those most needy.  But we are left to ask, who is right? 

A failure to raise the National Debt Ceiling and to raise taxes will in effect shut down our Federal Government, as we are witnessing in Minnesota.  For when both Tax revenues are stalled and we cannot borrow more money, our government will have no choice but to slash government programs and services in an attempt to balance a national budget.  Both parties agree that Tax Revenues have dropped due to the Great Recession and to prevent the raising of the Debt Ceiling and/or raising taxes will result in drastic cuts to our social programs.  But the question being neglected among our elected officials is, which of these two options will spurn economic growth?

The Democratic Party’s argument is that failure to raise the Debt Ceiling will cause the U.S. to default on its loans and obligations, forcing an undue burden of cuts upon government programs which many Americans rely upon such as Unemployment Benefits, Medicare, and Social Security.  Or to paraphrase, without raising taxes, we must borrow more to invest in the growth of our economy.  We cannot simply let the Tax Cuts remain in place while we are slashing investments in our infrastructure and our future.

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The Republican Party’s argument is that tax revenue will increase by lowering taxes.  Lower taxes will increase spending, lead to business investments, resulting in job growth, and hence higher tax revenue overall.  Or to paraphrase, in order to make ends meet, we must accept smaller profits on a larger number of people in order to make the same amount of money.  We cannot simply “Tax the Rich” as the Democratic leadership is proposing.  With a failing middle class and a failing economy, it’s not right to tax the “job creators”, who invest in our economy.

But which party is right?  Are both political parties holding an honest discussion with the American people?  Have either party withheld facts to prove their point is more valid than the other?  What is the best course of action to take over the issue of raising the Debt Ceiling?

The issue which the Democratic leadership has missed is that we cannot sustain our economy while piling up more debt.  Eventually we will reach an economic turning point where our economy cannot afford the interest on the debt, let alone spur any further economic growth through government programs.  Our National Debt must be addressed and contained.  This does not mean that our Federal Government must operate within a balanced budget, but rather a sustainable level of debt.  Federal spending must be cut at some point.  And in a failing economy, with interest rates hanging near 0%, with unemployment hanging around 9%, how much longer can we sustain this level of debt, let alone adding to it?

The issue which the Republican leadership has missed is that we cannot sustain these tax breaks, which were unaffordable to begin with.  These tax breaks on “job creators” have done a poor job in turning our economy around.  Certainly ten years of these tax cuts have created thousands of jobs, if not millions, but the majority of these jobs are all overseas!  That’s great for the business owner, but not so much for the millions of unemployed Americans who cannot find work and consequently are left with only Government assistance for help.  But then, the Republicans don’t believe in investing in America’s middle class, let alone America’s poor.  Hence the Bush Era Tax Cuts favored household incomes over $100,000 by a ratio of 4:1 (per data published by Center On Budget And Policy Priorities/cbpp.org).  In other words, for every $1 of tax cuts for household income under $100,000, there is a $4 tax cut for households over $100,000.  How much longer can our economy sustain such a level of unequal distribution of wealth?

By simply cutting spending without raising taxes will further jeopardize the sustainability of our economy by eliminating the middle class’ (a much larger segment of our society) power of demand from the equation.  The so-called “Job Creators” will not find a U.S. Market which can sustain their businesses, and hence be either forced to move overseas or face closure.  Simply raising taxes without controlling spending will further jeopardize the sustainability of our economy by positioning our economy near an unsustainable level of debt, where we will not be able to control the interest on our debt, further invest in our infrastructure, or provide for those who cannot provide for themselves.  Therefore, any reasonable proposal to balance our National Budget and reduce our National Debt must include both increasing taxes and cutting of federal programs, for one without the other will prove devastating to our economy.

But the argument we are hearing has little to do with balancing budgets, raising of the debt ceiling, or even our economy.  As House Majority Leader Mitch McConnell so aptly stated, the Republican’s number one priority is “..for President Obama to be a one-term president”.  Once Obama was elected as our president, Rush Limbaugh proudly pronounced “I hope he fails!”  And indeed, the Republicans have been actively pursuing that agenda from day one!   Through blocking all federal appointees proposed by President Obama, through using a record breaking amount of filibusters in one administration, through holding the extensions of Unemployment Benefits hostage to the extension of the Bush Era Tax Cuts, through attempts to de-fund all of President Obama’s policies, and through insisting on further tax cuts, the Republican Party has certainly proven that their number one priority is to make Obama a one-term president.

Let us all be clear on this point, the inequality of wealth concentrated among the top 2% of Americans, the unequally distributed tax cuts, and lack of regulations which caused this recession will not get us out of it.  Alienating society into an “Us or Them” mentality will not help solve our economic issues.  And furthermore, obstinately refusing to consider any raise in any tax will prolong our recession.  This is neither leadership nor governance, this is simply obstruction!

Indeed, economists from Northeastern University have released a study that finds our sluggish economy has almost solely benefited corporations and their shareholders: “…corporate profits captured 88% of the growth in real national income while aggregate wages and salaries accounted for only slightly more than 1% of the growth in real national income.”