The IMF Weighs In On US Deficit Debate – Is Compromise Possible?

Image from http://www.wired.com/threatlevel/2011/06/imf/

The International Monetary Fund (IMF) reported that it approves of the efforts to reduce the long term national deficit. But the “directors highlighted the urgency of raising the federal debt ceiling and agreeing on the specifics of a comprehensive medium-term consolidation programme.” They went on to say, “The strategy should include entitlement reforms, including additional savings in healthcare, as well as revenue increases.” However, they issued a warning that US growth was likely to remain subdued over the medium-term and advised against fast cuts which could impact on consumer spending. The current obstacle is getting both the Republicans and Democrats to agree on a plan.

This could present itself to be a large obstacle when Cantor walked out of the negotiations and Boehner bailed as well. The Republican’s extremist group known as the Tea Party has taken a hard stance against raising the debt ceiling. There are serious doubts that Republican leaders can get the Tea Party on board with their plans.

This is a crisis of choosing. Historically, federal governments ramp up spending during times of economic recession or depression. This effectively “picks up the slack” where the private sector is faltering. Conversely, tightening the belt of government spending during these times stagnates economic growth. But mind you, our national debt is at a historic high. Also historically, the debt ceiling vote has never been tied to a budget plan.

Continuing to add to the national deficit are the continuation of Bush-era tax cuts and the wars in Iraq and Afghanistan. To eliminate these non-funded activities would drastically lower our deficit spending. And yet neither side has suggested this proposal.

Where President Obama is willing to stake his presidency by compromising with the Republican hostage takers by offering cuts to Social Security and Medicare, the Republicans, in contrast, are demanding no increases in taxes. Compromise has proven to be a difficult pill to swallow among Republicans.

It was already reported, McConnell’s number one priority, which is “to ensure Obama is a one term president.” Immediately after Obama won the election, Rush Limbaugh stated, “I hope he fails”. That is the true ideologue of the Republicans. Their scorched earth policy has been laid out from day one, and what we are witnessing is the culmination of their dogma.

There are only two questions left to ask. Who will blink first? And, how far will the Republicans go to present Obama as a Socialist, Communist, Kenyan, Muslim, terrorist?