On August 2, 2011, the debt ceiling issue was finally resolved, ending a dangerous partisan stalemate that put the United States on the brink of insolvency. Even though it was touted as "bi-partisan," it mostly favors the GOP's aggressive "cuts only" approach. While it is great that the U.S. is reigning in its budget as it should have done earlier, economic instability still lingers.
Here are some of the details:
- $917 billion would be cut over 10 years in exchange for a debt limit increase of $900 billion
- Pell Grant funding would increase, but other financial aid will be cut. Graduate and professional education subsidies are eliminated.
- A balanced budget amendment to the Constitution must be voted on by October of 2011
- A joint committee of 12 members (6 from each party) needs to pass a bill that produces $1.2 trillion in more cuts by December 23, 2011 or else an across-the-board cut will be made to discretionary and mandatory programs. The amount will equal the difference between the $1.2 trillion minimum and the amount of cuts identified by the committee.
- The debt ceiling can be increased further if either the Balanced Budget Amendment is sent to the states or the cuts proposed by th committee exceed the amount of the requested increase.
This all seems nice and dandy, but my question is this: Where are the jobs?! Unemployment still floats at 9%. The stock market recently experienced its largest decline since 2008, undoing its gains for 2011. The fact that neither a stimulus plan nor a tax restoration for the top 2% earners was included means that America will have to wait until the summer recess is over to see any significant effort made towards a badly-needed and overdue kickstart to the economy. Furthermore, the tax restoration itself also could be used to better pay the nation's debts, demonstrating to our creditors our commitment to remaining solvent.
Here is my prediction for what will happen if we continue to allow the GOP use their cuts only appraoch:
- Due to the economy being unaddressed, consumer confidence will reach an all-time low. Lack of consumer spending will hurt businesses, which will fuel unemployment, which itself will fuel further undermine consumer confidence in a rather vicious cycle.
- The loss of jobs will sap tax revenues, resulting in further deficits that CAN'T be blamed solely on spending. The "supercommittee" may have to make more aggressive cuts or raise taxes across the board in order to balance the budget. This is the same trap that the State of New York found itself in during the Patterson administration.
- The big rating agencies (Moody's, S & P, etc.) will go from a negative outlook to actually downgrading us, due to the economic instability that was ignored. The continued deficits and the underinvestment in the fragile economy will give them more than enough reasons to trash the value of our securities. If that happens, then the interest on our debt would skyrocket. Portugal's is in the double-digits (loan-shark levels)!!!
- As a result of the above three, the U.S. recovery will finally halt, leading to a double-dip recession that will last for at least a decade.
In short, what the debt deal amounts to is a shallow band-aid solution that gambles on the consumer confidence of the American people, the trust of the ratings agencies and the international community. It stems from the arrogant and misguided belief that less spending and government involvement is ALWAYS a good thing. Spending reductions need to be made responsibly, leaving enough room for investment in education, infrastructure and other proven positives. Reduced government involvement should not equate to lax safety standards, loopholes that allow massive fraud and sending a message that government cares FAR more about its immediate pocket book than it does for the American people. This bill is a goddamn one-sided accounting trick that is already starting to backfire.
FIX THE FUCKING ECONOMY!!! THE ECONOMY IS AND ALWAYS HAS BEEN THE #1 PRIORITY!!! YOU CAN'T HANDLE ONE SIDE WITHOUT HANDLING BOTH!!! IT JUST DOESN'T FUCKING WORK THAT WAY!!!