It's going to be interesting to see what does and doesn't get done in Washington in the next few days. The House had passed a Republican "Cut, Cap, and Balance" budget plan that is DOA in the Senate. Meanwhile, the House leadership is trying to get a debt-ceiling raising plan passed, but it appears that we have a classic both-ends-against-the-middle fight.
Democrats want less cuts and at least some tax increases. Tea Partiers want more cuts and no tax increases. In between is speaker Boehner, trying to patch together a majority; it seems that enough conservatives don't want to line up their asses for him.
How much government do we want? How do we raise the money to pay for it? That's the questions that are unspoken behind this debate.
If we can't borrow any more money, we either have, in general, raise taxes and/or cut spending. Since the president can't raise taxes on his own, what's left is to cut spending, essentially going cold-turkey to a balanced budget.
Or, the third option is to ignore the debt ceiling and borrow more money anyway. That idea has been batted around as of late; a kindly reading of the 14th Amendment would allow the government to bust the ceiling in order to honor existing government obligations. It would then be up to the Supreme Court to play referee, something it is loathe to do in a President-Congress food fight.
At the end of the day, Revenues+Borrowing+Asset Sales=Expenses. How much government do we want and how do we pay for it? For now, the financial markets aren't too jittery, with the 3-month T-bill still down at 0.07%. If they were truly scared of default, would they be all but giving Uncle Sam free use of their money?
That being said, pray for the folks who might get laid off next month if that cold-turkey balanced budget comes to pass. Folks on the right tend to look down our nose as government employees, but the vast majority are everyday folks doing a honest day's work. The "nonessential" workers are needed, but can take a bit of a vacation without chaos descending over the realm; they'll be getting the short end of the stick if we stay status-quo without a bill.
We've seen states have this happen without a meltdown. Things will go on.
I don't have a good answer for the problem. However, even if the problem isn't solved, life will go on and the country will manage. Wall Street is yet to throw a hissy fit over things, so they might be better than the chattering classes make it out to be.
Comments