Monday, July 18, 2011

The Great Debt Ceiling Countdown,15 Days to Go, A Missed Chance for GOP

President Obama offered a $4 trillion deficit reduction package to Speaker Boehner, but Boehner could not sell it the House GOP majority, even though it was tilted 4 to 1 towards spending cuts rather than revenue increases and a NY Times analysis shows even Republicans in a Gallup survey say they require only a 3 to 1 ratio.

George Packer, writing in the July 25 New Yorkerdepicts the President as embodying responsibility without conviction – sane but not inspiring. The republicans represent conviction without responsibility, which is to say they are “raving mad.” Either way, the unemployed no longer have a place at the table. 
Comment: If you don’t have a seat at the table, you may be on the menu. Economists may not agree on details of solving debt issues, but the GOP emphasis on cutting spending now is preempting the potential for further fiscal action to revive the economy.  President Obama was acting on a utilitarian calculus, the GOP on deontological principles. But if politics is the art of the possible, rejecting Obama’s proposal was politically crazy. If S&P despairs of rational debate and lowers its rating on U.S. long-term debt, one outcome is that spending on debt service is likely to rise sharply.