Debt Ceiling Intransigence: Unintended Consequences…
by Dr. Paul Craig Roberts
July 25, 2011
Which party is responsible for intransigence on raising the debt ceiling? Republicans say the Democrats are, and Democrats say the Republicans are.
One could blame both parties equally, as both have their positions, but as I see it, it is the Republicans who are the most intransigent. The Democrats have shown more willingness to compromise, even offering cuts in Medicare and Social Security. Moreover, the Republicans started the fight, whereas the Democrats were willing to just raise the debt ceiling routinely, as in the past, and to get on with things.
The Republicans created the issue, so they are responsible. In fairness to the Republicans, it is a more important issue for them than for Democrats. The Democrats have always been more relaxed about debt than the Republicans. At the present time, the Democrats figure that if the financial crisis is reason enough for the Federal Reserve to lend $16.1 trillion, that is, $16,100 billion to private banks in the US and Europe–an amount $1.6 trillion larger than the Gross Domestic Product of the US, the US Treasury can afford to borrow another couple of trillion dollars. http://sanders.senate.gov/newsroom/news/?id=9e2a4ea8-6e73-4be2-a753-62060dcbb3c3
Citibank alone received $2.5 trillion in government loans, an amount larger than the Gross Domestic Product of Great Britain and larger than the GDP of all but five countries in the world. If one bank can borrow this much from the Fed, the US Treasury should be able to continue borrowing as well.
Nevertheless, one has to respect the Republicans for their concern with debt levels.
Fiscal discipline should never be written off as too much trouble. It is easier to spend money irresponsibly if the money can be borrowed, as many American consumers have learned. One should not denigrate Republicans for wanting to control the growth of the public debt, especially when the debt is consistently growing faster than the GDP.
However, for many, and perhaps most, of the Republicans in Congress, the issue is not merely about debt. It is about using a hyped “debt crisis” to slash the social safety net.
The reason Republicans are intransigent is that they see in the “debt ceiling crisis” the opportunity to return the country to a moral basis by curtailing welfare, handouts, and “Ponzi schemes like Social Security.”