REPUBLICAN POSITION:JOHN BOEHNER, the Republican speaker of the House of Representatives, said this week that it was as if "people from different planets" were negotiating to raise the US debt ceiling.
Republicans will not raise the debt ceiling without equal reductions in deficit spending, which they say must come from spending cuts only – no tax hikes. They want to decrease funding for social security and Medicare, which the ageing of the US population is driving up at unsustainable rates.
Five days of talks at the White House this week were fruitless. Yesterday, US president Barack Obama took the American people as his witness in his feud with Republicans. “This is not an issue of salesmanship to the American people; the American people are sold,” he said.
Standard Poor’s, Moody’s and Fitch ratings agencies have all warned that US creditworthiness is at stake. It is, Mr Obama noted, a manufactured crisis. Congress has raised the debt ceiling routinely for almost a century. The Republican leaders with whom he is negotiating have all voted to raise it in the past.
Those same Republican leaders have come under pressure from their Wall Street patrons to resolve the crisis before the economy is further damaged. They are torn between fear of harming their “brand”, as Senator Mitch McConnell called it, and their desire to sabotage Mr Obama’s re-election campaign with an unending budget and deficit crisis.
The older generation of Republican leaders, including Mr McConnell and Mr Boehner, are at odds with the younger wing, which is dominated by the ultra-conservative Tea Party. The latter have found a hero in Eric Cantor, the House majority leader, who engaged in testy exchanges with Mr Obama in the White House talks.
The Tea Party’s determination to shrink government by “starving the beast” is the root of the present crisis. They are playing a dangerous game of chicken, bringing the US to the brink of default on part of its $14.3 trillion (€10.1 trillion) debt. In effect they are holding the global economy hostage to their ideology of small government and low taxes.
At stake is the survival of the welfare state established by Franklin D Roosevelt. The ultimate goal of the Tea Party would be to do away with social security and Medicare. Mr Obama implied as much yesterday when he said that the size of cuts demanded by Republicans – $2.4 trillion – without offsets from increased revenue would “gut” social security and Medicare, “the most important social safety nets we have”.
More than 230 House members and 40 senators, the vast majority Republicans, have signed a pledge not to raise taxes under any circumstances. The pledge has been pushed for decades by Grover Norquist, who founded Americans for Tax Reform in 1985 at the request of the then US president, Ronald Reagan.
Mr Norquist predicted years ago that George W Bush’s tax cuts, which were supposed to be temporary, would become permanent.
The dispute over extending those tax cuts beyond their current expiry date at the end of 2012 is at the core of the negotiations.
Last December, Mr Obama concluded a deal with Mr McConnell to extend cuts for Americans earning more than $250,000 a year. That made it possible for Congress to wrap up unfinished business, but Mr Obama is paying for it now.
Mr McConnell’s fall-back solution to the debt ceiling crisis would fund the US government through the presidential election, while allowing Congress to express its displeasure.
As Mr Obama said yesterday, the US is facing two problems: raising the debt ceiling in the short term, and reducing debt and deficits over the long term. Mr McConnell’s plan resolves the former, but does not even begin to address the latter.
