The US debt ceiling ‘dance of deception’

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By Carlton Joseph

Carlton Joseph

The United States (US)debt ceiling, which currently stands at $31.4 trillion, was created more than a century ago, and has been modified more than 100 times since WWII.  The debt ceiling has become a political “dance of deception,” for both parties.  A dance, where politicians confuse the population and, in the end, the rich preserve or get additional tax cuts; and increase their wealth, the middleclass shrinks, the number of poor people increase, and more people are placed in extreme poverty. 

Not raising the debt ceiling is insane, because raising the debt limit is about paying for past spending decisions that Congress previously authorized: like fighting wars in Vietnam, Iraq, and Afghanistan, supporting the war in Ukraine, or passing tax cuts for the wealthy under Presidents’ Reagan and Trump.  Trillion-dollar deficits require regular bond sales to keep money flowing, because this statutory debt ceiling isn’t adjusted for inflation, economic growth, or the size of the population, it must to be raised from time to time.

The Fourteenth Amendment, section 4, states that “the validity of the public debt…shall not be questioned.”  This means that default is unconstitutional, and there is absolutely no need for lawmakers to be flirting with default, which raises the price of future borrowing, and creates a crisis that would make the long-term fiscal problem worse.  Lawmakers have three policy choices or a combination of these choices, in this “manufactured” debt ceiling crisis: raise taxes, borrow more, or decrease spending.  The dance of deception happens, because politicians, main stream media, capitalist economists, and academics from institutions like Harvard, Yale and other ivy league universities, refuse to consider, tax increases as a part of the solution.

Republicans have opposed Social Security since its creation in 1935, to this day.  Since its creation they have opposed disability insurance, proposed making it voluntary, tried to kill Medicare, and voted against an increase in social security tax to keep the system solvent.  Under Reagan they enacted $24 billion in Social Security cuts, and removed 106,000 families from the system’s roll.  In the 90’s, they appealed to younger workers to put their social security insurance payments in the stock market, in their efforts to privatize the system.   For Republicans, the debt ceiling deception dance is about killing the Social Security system, and any other safety net programs they consider socialist programs.  For Democrats, the dance is to fight for the system, but in the end, allowing cuts in benefits, without raising taxes. Raising taxes is the holy grail.

During the 2011 Obama administration, Republicans refused to increase the debt ceiling unless they got the spending cuts they demanded.  President Obama tried to strike a deal, whereby Democrats would agree to cuts in Social Security and Medicare, in exchange for higher taxes on the rich, even though the Bush tax cuts were scheduled to expire the next year.  Republicans rejected the deal, and demanded an all-cuts approach to deficit reduction.  The result was “sequestration” and the Budget Control Act, which mandated sharp cuts in discretionary spending, equally split between military and nonmilitary programs.  The country’s credit rating was downgraded by Standard & Poor’s, markets plummeted, and borrowing costs went up by $1.3 billion.

Today, Congress is in a very similar position after Republicans retook the House, and Democrats held the White House and the Senate in 2011.  House speaker Kevin McCarthy and Republicans seem determined to replay 2011.  Republicans’ proposal would raise the debt ceiling through March of next year, and it included over $4.5 trillion in spending cuts.  If Biden accepts this, he is setting himself up for another debt ceiling showdown, and demand for more spending cuts in March.  

Interestingly, constitutional scholars and economists are having a debate over its deployment, “scholars” saying that it would create a constitutional crisis, and economists warning that a default on the national debt could include higher interest rates, a stock market crash, a recession and massive job losses.  President Biden has one option, trigger the 14th Amendment, because the country has been in a constitutional crisis since President Trump was elected in 2016.

The country cannot afford an economic crisis, especially when there are other options that Congress should be considering.  For example: Currently, social security tax is applied to maximum $160,200.00 income, the tax should be applied to all wage and salary income.  Currently, a married couple can gift more than $25million in assets tax free, Statista reports that 12 percent of all households in America had assets worth least million, Congress needs to apply some tax to this inherited wealth.  The top tax rate is 37% for individuals earning over $578,000 annually, the tax rate for corporations’ profits should be at least 40 percent, because business owners are able to write-off expenses that ordinary people cannot.

Finally, the debt ceiling should not be a partisan political football.  Congress created these debts when they approved spending for war in Afghanistan, Iraq and Ukraine, and billions in aid to beneficiaries around the world in pursuit of its security, economic, and geopolitical interests.  The Afghanistan war cost taxpayers $3 trillion, additional spending on the war in Ukraine will increase the Federal deficit, and the government will have to issue additional Treasury bonds to cover theses costs.  Lawmakers must understand that they cannot spend money on wars, where military contractors and weapons’ makers make exorbitant profits, but ordinary taxpayers have to pay the major cost of these entanglements.  In 2011, the Republicans forced sequestration and got $2.1 trillion in spending cuts over 10 years, with cuts in Medicare spending, by $11 billion in 2013.  The resolution of the debt ceiling is essentially about politics, about who will get blame for the default.  Biden must use the 14th Amendment and raise the debt ceiling if Republicans insist on being disruptive. The public is not stupid; they will understand who caused the breach.

(Trinidad-born Carlton Joseph who lives in Washington D.C., is a close observer of political developments in the United States.)