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December 21, 2010

The Debt-Ceiling Threat To Gut The Things Government Does For Us

-- by Dave Johnson

This post originally appeared at Campaign for America's Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF.

The country’s huge debt was caused by tax cuts for the rich and increases in military spending. But debt-cutting recommendations from the D.C. Elite never suggest restoring taxes on the rich and cutting military spending. Go figure. Instead they suggest cutting the things government does for We, the People. The D.C. Elite is not We, the People. Let's stop this in its tracks.

Just a week after the Senate voted to give a big tax cut to the rich, increasing the deficit by more than $800 billion, a few senators have gotten together to push the deficit-cutting recommendations of … two guys.

According to The Washington Post, Senators Mark Warner and Saxby Chambliss are leading a group of senators gearing up to push deficit-cutting recommendations made by Senator “Milk cow with 300 million tits” Alan Simpson and Senator “On the Board of Morgan Stanley” Erskine Bowles. They will push this as the recommendations of the full deficit commission, even though the deficit commission specifically did not recommend this. This is just a plan that two guys came up with. Or, as they described themselves, "just two clowns from Wyoming and North Carolina."

From Reuters, Warner, misrepresenting the source of the deficit plan,

"Taking the commission's report ... we'll be introducing that as legislation, a legislative vehicle, next year, recognizing in the process that a lot of that would be subject to change," Democratic Senator Mark Warner said.

Wrong! Not the deficit commission, just two guys.

Everything On The Table -- Except Anything Wall Street Doesn't Like

The group claims that "everything" will be on the table, even though the recommendations of the two guys closely follows a Wall Street corporate/conservative agenda.

"The way you do it is put everything on the table," Chambliss said Wednesday, appearing with Warner before a group of reporters.

Everything, that is, except tax rates on the rich and corporations, and military spending, and a financial transaction tax, and restoring the estate tax, and... . In fact, the plan is to get rid of tax breaks for the middle class and cut tax rates on the rich and corporations, and the recommendations of the Citizens Deficit Commission or commission member Rep. Jan Schakowsky's deficit plan. Everything -- except all of that.

So what does the plan by the two guys propose? From the Washington Post story,

Warner noted that the two men agree on the general idea of broadening the tax base by eliminating many existing deductions, while at the same time lowering personal and corporate tax rates.

That’s right, the two guys propose cutting tax rates for the rich and corporations even more. Income and wealth is increasingly concentrating at the top, leaving the rest of us with less and less, starving the country's infrastructure, starving our people's education and health care and retirement and pushing us ever closer to third-world status, the D.C. Elite are pushing even more tax cuts for the wealthy and corporations and even more cuts in the things government does for We, the People.

Take a minute to absorb that.

The "Leverage" Of Destroying The Economy

In our democracy, how do they think they can push this Wall-Street-oriented plan to gut our government through? For some reason, they think that taking hostages might work. Why, oh why, would they think that threatening to do harm to the country and its economy might give them "leverage" to get what they want? Where would they ever get that idea? What hostage do they plan to take?

They plan to threaten to destroy the "full faith and credit' of the country if we don't give in.

Before next summer, Congress will have to take a painful vote to raise the federal debt ceiling to allow the country to borrow more money.

"If we can use that as a leverage" to get the ball rolling on a deficit-reduction plan, Chambliss said, "that's an ideal scenario."

The threat to block a debt-ceiling increase is leverage because if the debt ceiling is not raised the United States of America will be forced to default on its debts, destroying the "full faith and credit" of our country, the "soundness" of the dollar, and the underpinnings of the world's economy. This would have consequences that go far beyond the harm caused by the financial crisis of 2008. This is the fire they want to light.

But who is really being taken hostage with this "leverage" play? Dean Baker, in Saving Social Security: Stopping Obama's Next Bad Deal says that the debt default threat is actually pointing at Wall Street, not the country. Baker writes:

A debt default would be a very bad situation and one that we absolutely should try to avoid. But the day after the default, the country would still have the same capital stock and infrastructure, the same skilled labor force and the same technical knowledge as it did the day before the default. In other words, the ability of our economy to produce more than $15 trillion in goods and services each year will not have been affected.

One thing that would not be around the day after a default is Wall Street. The default would wipe out the value the assets of the Wall Street banks, sending Goldman Sachs, Citigroup and the rest into bankruptcy. The recovery for the economy from such a situation will be difficult, but the shareholders of the Wall Street banks would be wiped out and their top executives unemployed.

For this reason, the threat of a default is a gun pointed most directly at Wall Street. Given the power of Wall Street over Congress, is inconceivable that they would ever let the Republicans pull the trigger.

So while the conservatives claim they have "leverage" by taking the country hostage, the country would survive but Wall Street would not.

Outrageous Threats

Even so, this idea that holding the full faith and credit of the country hostage is playing with fire. It is an outrageous threat to hold over anyone’s head. They are literally threatening the livelihood of, well, everyone, to get more tax cuts for the rich and big corporations and cuts in the things government does for We, the People. Not a vote by the public, but a threat to wipe us out if we do not give this to them.

Should our representatives in the Congress be trying to find common ground with people who want to gut our government and threaten to wipe out our ability to make a living?

The Public Hates Threats

Conservatives tried this before, under Speaker Newt Gingrich. They actually closed down the government in an attempt to dismantle the Medicare program. President Clinton stood up to the threat. The country was aghast that Gingrich and his party acted so irresponsibly and they paid the price. Clinton turned his presidency around by standing up to Gingrich.

President Obama should show the backbone that Clinton showed against the Gingrich Congress. The public hates being threatened and will not forgive anyone who gives in to it. Do not give in.

Action: Get ready now for the coming fight!

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Posted by Dave Johnson at December 21, 2010 1:38 PM


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