With the presidential election behind us the next obstacle facing this nation is an impending fiscal cliff. In January 2013 the United States will approach a so-called “fiscal cliff”. At this point the Bush tax cuts from 2001 and 2003 will end for all Americans, the payroll tax cuts put together by President Obama will end, and an automatic cut of more than $1 trillion will be taken out of the discretionary defense budget.
A few weeks later the United States would approach its debt limit and, if Congress is still busy fighting over dealing with the fiscal crisis, the federal budget will run beyond its limitations. This would create a cascade of debt downgrades for US Treasury bonds and potentially hamstring any and all attempts at recovery.
The results of such a default could be devastating. At the very least a Treasury default would almost certainly result in another downgrade of American bonds. Such a downgrade already happened. In August 2011 the firm Standard & Poor’s downgraded U.S. Treasury bonds from their sterling AAA zenith to AA+ for the first time in history. The downgrade came after Republican brinksmanship in Congress drove the United States of America to within hours of break the fiscal cliff and perhaps beginning a wave of debt defaults.
American debt had been the standard bearer of bond stability for nearly 70 years.
A rating of AA+ is far from weak and the United States Treasury was still considered the safest financial investment in the world after the downgrade. However, the ratings agencies and international financial markets were not pleased to see flirtation with disaster. Republicans took to the campaign stump and blamed the Obama administration and Democrats for the downgrade.
It was Republican intransigence that pushed America to that point and House Speaker John Boehner (R-OH) has promised to drive this economy up to the edge again in just a few weeks.
This Congress has to agree to disagree on some things. The American people are well aware that nobody in Washington would cut spending if they didn’t have to. Most Americans do not realize that President Obama has actually cut enormous sums from the federal budget.
Republicans want to see “fiscal responsibility” from Democrats before agreeing to raise the debt limit and allow more so-called “runaway” spending. The fact is, when Republicans had control of the White House they slashed revenue, particularly cutting taxes for the richest of the rich. Not only did they slash the amount of revenue coming in to the government, they also dramatically escalated government spending and greatly increased government employment.
Then, of course, they destroyed the economy and burned $3 trillion on senseless wars that left thousands of Americans and hundreds of thousands of Iraqis and Afghans dead, injured, and impoverished.
President Barack Obama was handed an unimaginable multi-front catastrophe when he took office on January 20, 2009. Adding insult to injury, the White House was then forced to work through Republicans who blocked or delayed literally all legislation through every means available to them every single day for his entire first term in office.
Republicans knew that flirting with debt default would hurt America’s credit rating and potentially harm the economy. Every single financial expert told them that. They drove us nearly over the edge on purpose and spent the entire lead up blaming the White House for its radical policies.
If the same obstructionist path is take up to January 2013 America will face another debt downgrade and another financial crisis.
Financial markets reacted with big losses in the wake of President Obama’s re-election. Markets opened on Wednesday November 7th with two to three percent declines. Why? The financial industry recorded more profits during Obama’s first term than during any single presidential term in history. They weren’t upset that Obama was re-elected; they were frightened that Republicans in Congress would drive America up the edge once again in hopes of taking political advantage.
Obviously the United States cannot continue spending so much more than it brings in. The obvious answer to the question presented by our debt is to begin combining both gradual decreases in spending with gradual increases in taxes.
Unfortunately, the entire Republican caucus in the House and Senate have sworn their allegiance not to the American people but to Grover Nordquist and his anti-tax pledge. A Republican who votes “yes” on new taxes will be thrown from the party by the radical fringe that would rather see the entire government collapse than address a simple accounting problem.
President Obama has been the most austere Democrat in history and he has cut far more spending from his budget than any other president (regardless of party) in history. The federal budget is $300 billion less in 2012 than it was in 2009, and that budget was the one handed to President Obama by George W. Bush. When you account for the fact that the Bush budgets did not include the wars in Iraq and Afghanistan you find that not only are the Obama budgets shrinking they are also vastly smaller than his allegedly fiscally conservative predecessor.
The American economy is too important to continue such childish and meaningless partisan squabbles. The entire Republican caucus set itself on a mission to prevent President Obama’s re-election. That attempt failed miserably. Now the two sides have to sit down and make some tough decisions together. They can accomplish nothing if the Republicans once again flip the table over, cross their arms, and refuse to speak.
America deserves better than that.