Extortion and the National Debt Ceiling

By Miryam Ehrlich Williamson

Today Republicans in the House will bring up a bill to raise the limit on the national debt, a move required before the government can borrow any more money to finance its operations. Actually, we reached the debt limit a couple of weeks ago, but the Secretary of the Treasury authorized various bookkeeping strategies, including borrowing from one pocket to fill another, to put off the day when the actual vote must be taken — and passed, if an international financial crisis is to be avoided.  Or so the administration tells us.  I have to issue that disclaimer, because I have no independent source of such knowledge. Nor does anyone else.

Today’s vote is intended to be defeated. It’s a straight-up-or-down raise-the-limit-or-don’t measure meant to set a trap for Democrats. The Republican House members are expected to vote No, because they want to attach serious budget cutting measures to the bill.  The Democrats will be wrong, whichever way they vote.  If they vote to raise the limit, which will fail, they will be attacked in their 2012 re-election campaigns for ignoring the urgency of budget cuts, since budget deficits are what trigger borrowing, which increases the national debt.

If the Democrats vote no, they will be attacked in their 2012 re-election campaigns for being against raising the debt limit before they were for it.  I can see the rubber flip-flops flip-flopping in the 30-second spots as I write this.

If you are represented in Congress by a Democrat you want to see re-elected, there are two things you should remember, and perhaps tell others whose votes you want to go to your congress member. The points, which will be explained individually, are these:

1.  During the previous (Bush) administration, Republicans voted seven times to increase the debt limit, without any objection and without attaching any requirements or amendments to the measure.

2.  The national debt is not nearly as dire as Republican legislators would have you believe.

Here’s the scoop:

1. During the Bush administration, Republicans voted seven times to increase the debt limit, without any objection and without attaching any requirements or amendments to the measure.

Longstanding practice was for the House, when it adopted its operating rules on the first day of each new session, to include a provision for authorizing an increase in the debt limit when it was needed. The authorization was almost always by unanimous consent, without debate and without any amendments being attached.

That was then. At the beginning of the present Congressional session House Republicans, who controlled the rules presented, omitted debt limit increase authorization. Credit the Republican leadership with foresight: they had extortion in mind.

The House proposal would raise the government’s borrowing authority by $2.4 trillion, the same amount proposed by President Obama in his budget plan. Included is authority for the Department of the Treasury to continue paying bills through the end of 2012. Republicans, one of whom is the bill’s sponsor, will reject it because the party insists that any borrowing increase be matched by a greater amount of spending cuts. Democrats want a “clean” debt increase bill, to avoid the political maneuvering that will be inevitable when budget cuts come up.

In other words, Congressional Republicans intend to hold hostage the “full faith and credit” of the United States — its promise to repay its debts in full and on time — to a multitude of measures meant to reduce aid to the needy, cut funding for the Environmental Protection Agency to cripple its ability to reduce emissions that contribute to climate change, and turn Medicare into a free-marketer’s dream and elder’s health care nightmare.

This from the party that voted without a murmur to grow the national debt by more than $4 trillion when one of its members was president.

On the day President Bush took office, the national debt stood at $5.727 trillion. The latest number from the Treasury Department shows the national debt now stands at more than $9.849 trillion. That’s a 71.9 percent increase on Mr. Bush’s watch.

And that was before the Bush administration’s economic bailout measures were enacted, boosting the national debt to $11.315 trillion . Now the Republicans are trying to hang the national debt around Obama’s neck.

It would be easy to make the case that the last Republican administration’s borrow-and-spend policy was designed to drive the country to the point of bankruptcy, making it easier to eliminate spending for social purposes while arguing that unfettered spending on “homeland security” and tax cuts for those who need them least are the only necessities.

This chart, from the Center for Budget and Policy Priorities, by way of Common Dreams, shows that the Bush era tax cuts and two undeclared wars are responsible for more than half of the present massive debt that is driving the Republican effort to cut spending on anything that might benefit any but the rich and those who profit from war.

2.  The national debt is not nearly as dire as Republican legislators would have you believe.
Republican officials, particularly the radical wing, are fond of saying that families have to run on balanced budgets and the government should do the same. When I was a youngster, before I learned anything about financial management, that sounded good to me, and I probably said it myself more than once.  But if you hear it said by a presumed adult, presumably responsible legislator you should know that the person is either abysmally uninformed or being dishonest. Or both.
First, a personal note.  I hate owing money. If I’d been willing to borrow more than the mortgage on my house, if I’d been willing to gamble with Other People’s Money, I’d be a lot better off financially than I am. I was born during the Great Depression, when people with what seemed reasonable debt a few years earlier were jumping out of windows. So when I say the national debt isn’t that big a deal, you should listen to me. Sure, you should form your own opinion, but not until you hear an alternate view to the one being spread by the radical right and swallowed whole by the mainstream media and, to my everlasting disappointment and distress, by the Democrats and their leader in the White House.
You can get a good idea of a family’s, a company’s, or a government’s financial stability by comparing what it owes with what it earns. If your income is $50,000 a year and your total debt is $50,000, your debt to income ratio is 1 to 1. The two amounts are identical.  If your income is $50,000 a year, your mortgage is $150,000, and you don’t owe anything on your credit cards, then your debt to income ratio is 3:1. You owe three times what you earn in a year. Actually, that’s not bad; as long as your job is secure, you’ll be able to pay off the mortgage in monthly installments.
Here are the debt to income ratios of some of America’s largest corporations.

•IBM— 2-1

•Dupont — 3-1

•United Technologies — 3-1

•Boeing — 4-1

•Caterpillar — 14-1

•JP Morgan Chase — 50-1

In other words, IBM (which has known hard times and is probably more careful than many companies) owes twice what it earns in a year.  JP Morgan Chase, which the financial folk would describe as “highly leveraged,” owes 50 times its annual earnings.  If JP Morgan Chase were a person, the way the Supreme Court says it is (see Citizens United) he wouldn’t sleep at night.
America’s income is its Gross Domestic Product (GDP), the amount it produces in a year. Currently the US GDP is about $14.5 trillion. The national debt is $14.3 trillion. In other words, the US debt to income ratio is slightly less than 1:1. We earn/produce a little more than we owe.
Now that it’s too late for me, I understand that there is a valid purpose in borrowing, much as I did in taking on my first mortgage when I was 22 — to invest in something whose value you expect to grow, so that you can pay back your loan and have money left over. Profit, in other words. That’s how families run, if they’re being responsible. (This does not include buying a huge flat-screen TV on your credit card. The TV will not increase in value and you’ll never sell it at a profit.) That’s how businesses run: they borrow to invest in equipment that will increase their earning capacity.
So here we have a nation with a 1:1 debt to income ratio and the right wing radicals want to prevent us from borrowing to increase our earning capacity.  What increases earning capacity for a nation?  Roads. Education. Projects that provide jobs for people who then pay taxes and have money to spend so that the companies they give that money to pay taxes.
Cutting taxes does not increase a nation’s earning capacity. Taking away assistance from people who can’t afford to feed their children or heat their homes does not increase a nation’s earning capacity.
It doesn’t matter if the Republicans in Congress are determined to drive this country into abject poverty or  if they’re just stupid and short sighted.  They’ve got to be stopped.  And the Democrats who are buying into the Republican world view that debt is disaster have got to be stopped as well.
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