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Monday, July 18, 2011

Debt Deja Vue: It isn't smart governance or politics

by John MacBeath Watkins

Does this put any pressure on congress to reach a deal on the debt ceiling?

That's from a new CBS poll, as reported here.

Imagine that, people not responding well to demagoguery. That hasn't happened since...well, the last time Republicans tried to hold the economy hostage using the debt ceiling in 1995-96. My hope is that they will learn their lesson this time, and do their negotiating about the budget when they are passing taxing and spending legislation rather than when the question is whether we should default on the nation's debt.

I believe they were fooled both times by the noisiest part of the Republican base and by polls taken before the public started paying attention to what congress was doing. In the abstract, more debt doesn't sound good to people. As the crisis builds, and they realize a vote not to raise the debt ceiling is a vote to default on the debt, the notion becomes less popular.

But Republican legislators are trapped by their own rhetoric. They whip up their base with talk of a crisis, even though they've raised the debt ceiling in similar circumstances without a peep for a Republican president, then  they have trouble backing away from their demagoguery as the crisis they've brought on approaches.

It isn't smart governance, and it turns out that it isn't smart politics, either. And now, they're bringing out another relic from the 1995-96 crisis, the balanced budget amendment. As written, it would restrict federal spending to 18 percent of GDP, and would require a super majority to raise taxes. The super majority rule is undemocratic and has led to an ongoing fiscal crisis in California as a minority holds the state hostage for their agenda. In essence, it would require that when we go into a recession and the GDP falls while tax receipts fall, we make big cuts elsewhere, probably including Social Security and Medicare, which would make the recession worse.

A more workable alternative would be to stop believing in magic when it comes to budgetary matters, and pass the taxes required to pay for the services voters demand. But that would mean abandoning more than 30 years of tax demagoguery.

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