The talks between Republicans and Democrats about raising our national debt limit are frustrating to follow. It’s like a merry-go-round. The people go round and round and there appears to be activity, but nothing ever goes anywhere. All the while, the August 2 deadline — after which the United States will default, according to Treasury Secretary Timothy Geithner — looms ever closer.
House Republicans have passed a budget that was rejected by President Obama and Senate Democrats. The Republicans say any increase in the debt limit must be matched by actual cuts in current and future spending and have insisted that tax increases cannot be part of any resolution. Senate Democrats haven’t passed a budget in years, but have floated a proposal that has not been the subject of public hearing or debate. President Obama has gone from proposing a budget at the start of the year that did nothing to reduce annual deficits, to proposing a budget framework that was so nebulous it could not even be scored by the Congressional Budget Office, to now taking the Republicans to task for not agreeing to compromise on tax increases.
Talks are occurring, behind closed doors, between the principals — a result that should cause good government advocates everywhere to shake their heads in dismay. Republicans say President Obama stalked out of the talks last night; Democrats say the President left because he was rudely interrupted by House Majority Leader Eric Cantor. Posturing is running rampant on all sides.
In the meantime, Moody’s has announced that it is placing the U.S. under review for a rating downgrade. Imagine! U.S. government bonds and notes, for years viewed as the safest possible investment, may lose that designation because our political leaders cannot reach an agreement. Any rational person understands that if any default or serious uncertainty occurs, the interest rate on future U.S. borrowing will increase as investors demand an increased return for the increased investment risk — as investors inevitably and understandably do — and that result will just make our debt burden that much heavier and the ability to bring the budget into balance that much more difficult.
It’s time for our leaders to put aside the politics and put the national interest first. It appears that Republicans would agree to a short-term deal that would make cuts proposed by the President’s own Debt Commission and raise the debt ceiling by the same amount, to allow additional time for negotiations on a broader solution. That is what the parties should do. The President, having waited until the eleventh hour to engage, can’t reasonably insist on a long-term deal and risk a default as a result. And while Democrats may complain, they have only themselves to blame — they could have raised the debt ceiling last year, when they controlled both Houses of Congress and the White House, but they failed to do so.
The bottom line is, we shouldn’t be playing chicken with our national credit or investor confidence in U.S. securities.