IT’S ALL getting perilously close to the wire. Washington remained this weekend locked in its bitter partisan deadlock over raising the US statutory $14.3 trillion debt ceiling before the August 2nd deadline. After which, economists warn, apocalypse.
The difference between Democrats and Republicans, however intractable, remains remarkably simple. The latter, driven by hard-line Tea Party ideologues, insist that any deal on cutting the US deficit, a precondition for agreeing to raising the debt ceiling, can not include tax increases, and specifically not those on the wealthy proposed by President Obama. And the president will not countenance deep reductions in healthcare for the elderly. On Saturday in another appeal directly to the public he again attacked congressional Republicans for rebuffing “shared sacrifice and a balanced approach”.
House Republicans have tied their willingness to raise the ceiling, which they agree is necessary, to a balanced budget amendment to the constitution requiring a two-thirds vote in both houses to run a deficit in any year, and imposing a cap on spending, 18 per cent of the GDP in any year. The same supermajority would be needed for any tax increase.
Such an amendment would give a stranglehold in Congress to a right-wing minority and require cuts in spending on social and health programmes far beyond those even contemplated by moderate Republicans or the $4 trillion cuts over 10 years the president is proposing. In truth, had such requirements been in place in 2008 the stimulus package and the crucial efforts needed to stabilise both banks and car manufacturers would simply not have been possible.
The measure, which has no hope of passing in Congress, is populist political grandstanding by Republicans in the hope of regaining the initiative ahead of the presidentials. But the public is not impressed. Polls consistently show a majority favour higher taxes on the wealthy and corporations to help reduce debt.
A glimmer of hope is being held out by Senate leaders Mitch McConnell and Harry Reid. They are proposing a stop-gap measure, backed by Obama, that would allow him to raise the debt ceiling in exchange for commitment to a powerful 12-member fiscal committee with a strong deficit reduction mandate to report by the end of the year. McConnell, sugaring the pill with $1.5 trillion in cuts, is still some way from persuading fellow Republicans to back the compromise. As the world watches on nervously, he is running out of time.