Tuesday, July 12, 2011

Thoughts on the Debt Ceiling Talks

I do realize that what is going on right now is mostly political theatre but I also have to shake my head about the whole situation, especially the behavior of Obama.  Having seen negotiations occur in the non-political world firsthand, I'm used to the people involved try to get things done, unlike the current administration, which seems to want the exact opposite (I'm actually starting to think Obama wants a default so he can blame the GOP, as his W bashing is no longer working outside of academia).  Just two weeks ago he actually said he was too busy to be involved with the negotiations and now he says he will veto any short term solutions and he implied he would do the same with anything that didn't raise taxes.  The US is already the most progressive tax system in the developed with the top decile paying a more disproportionate percent of taxes than any other country in the OECD.  Also, we already have a slew of taxes coming in 2013, including across the board tax rate increases (as tax rates revert back to those under Clinton) and a slew of taxes coming from Obamacare.  The worst part is, Obama knows that a very large number of Republican Congressman signed a no tax pledge, so raising taxes is a no go.  With time quickly running out, Obama is trying to make the GOP cross a redline they cannot cross.  Not exactly the actions of someone who is trying to get a deal done.

On another point, I'm getting the feeling that the product of all these negotiations might not be what we think it might be.  How could we possibly reform Medicare, Medicaid, Social Security and the general budget by August 2nd?  Just writing the bills to do so would probably take longer than that.  My guess is that a debt ceiling increase will be exchanged for nothing more than promises to tackle them later on.  As if they will be tackled going into an election year.  I'm hoping I'm wrong and that we at least get hard spending caps, but the rumor of a "contingency" plan from Senate Republicans is giving me a sinking feeling.  Republican voters will go nuts if they back down.  After all, we didn't elect the GOP to capitulate on deficits, we elected them to shrink the size of government.

Update:  Apparently the Democrats were only offering $2 billion in discretionary spending cuts next year. Talk about a very unserious set of negotiations.

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