Band Aids, Peas & Other Tough Choices

After lawmakers on both sides of the aisle failed to reach an agreement to raise the debt limit by the August 2 deadline, two things happened on Capital Hill.

First, President Obama said that he couldn’t guarantee Social Security checks and other government benefits would be paid. Second, Republican Senate leader Mitch McConnell proposed that Congress could empower the President to lift the government’s spending limit to avoid default without the approval of the GOP.

McConnell’s proposal heartened moderate Dems, but infuriated the Republican base — especially the Tea Party.

“I’d rather see a bipartisan deal than have President Obama do it without Congress,” said Rep. Jim Himes. “In the long run, that’s what will work. I haven’t been in D.C. long but I’ve been here long enough to see that deals are made in the eleventh hour. I’ve watched Cantor and Boehner walk out of negotiations but I hope they’ll come back to the table."

A similar showdown between the President and the GOP had taken place days earlier after POTUS stated that both sides needed to compromise, adding that he would not accept a short-term deal.

“We might as well do it now — pull off the band-aid, eat our peas,” Obama said.

Then, behind closed doors, Republican House leader, Speaker John Boehner discussed with Obama the possibility of reaching a deal that could raise revenues for Democrats, while cutting spending for Republicans. After outrage from the right, Boehner was forced to eat not his peas but his words.

The White House plan has actually endorsed many more spending cuts than tax increases — roughly $3 in spending cuts for each new $1 in revenue.

“I was one of 100 or so members who voted to raise the debt limit because failing to do so will result in a catastrophe,” said Himes. “I met with Ben Bernanke today who warned that if the limit is not raised we will be faced with job losses of a magnitude similar to what we saw in the financial meltdown. This is a difficult issue because most Americans don’t understand what lifting the debt limit means — they think it means creating all kinds of new programs, which is not the case. We incurred a lot of debt due to the wars and other issues. Not paying those debts is the same as going into a store and buying a flat screen TV but then refusing to pay the credit card bill at the end of the month."

Obama and his economic team have been warning that catastrophic consequences for the U.S. and global economy would ensue if Congress does not increase the $14.3 trillion debt limit by the deadline, as previous Administrations (including Bush/Cheney) have done routinely. America hit the $14 trillion debt ceiling on May 16.

“Like the President, I’m not in favor of a temporary fix,” said Himes. “The debt ceiling is a fiction and a dangerous one at that. Raising it did not cause a problem under Reagan or Bush. I do believe an agreement can be reached but it will require both parties to negotiate and compromise.”

The President has vowed to meet with lawmakers every day until an agreement is reached.

The stumbling blocks continue to be that Democrats won’t accept cuts to entitlement programs including Social Security and Medicare, while Republicans refuse to raise taxes on the rich or close tax loopholes for corporations.

Obama said that both parties must be willing to take on their “sacred cows,” asking for spending cuts that will “make the government leaner, meaner, more effective, more efficient, and give taxpayers a greater bang for their buck,” and for new revenues taking effect in 2013 that will close “egregious loopholes that are benefiting corporate jet owners or oil companies at a time where they're making billions of dollars of profits.”

“Sooner rather than later we’ll need to equitably reform Social Security and Medicare,” said Himes. “While these programs are fine now and have given remarkable value to many generations of seniors, in the coming decades they face sustainability problems. If fixing that can be achieved in a grand bargain that looks like Simpson-Bowles I think that would benefit the country. But we need a balanced deal.”

If an agreement is not reached, nearly half of all government checks won’t go out. According to an analysis by the Bipartisan Policy Center, that comprises about 45 percent of the 80 million payments it needs to make every month. Currently, 29 million seniors rely on Social Security checks. Other recipients ranging from veterans to those owed tax refunds will also have to go without. Additionally, the U.S. Treasury won’t be permitted to borrow more money to make up for the gap between revenue and spending.

Many experts fear that default would cause the markets to go haywire and the dollar to tank.  And if confidence in the ability of the government to fulfill its most basic obligations occurs, then the U.S. reputation would be inescapably damaged.

While certain GOP lawmakers have stated that bringing down the President and causing the government to fail would help them regain the White House, Himes does not think that is a responsible agenda.

“If they are saying that, I hope people will remember those words in 2012, but I hope they don’t really think that,” he said. “If you are willing to risk bringing down the government for partisan gain, you shouldn’t be in office, you should be in prison.”