Washington Watch: Raising The Federal Debt Limit
By Arlen Specter
A key issue in Washington this week is the political conflict on raising the federal debt ceiling. If Congress does not act by August 2nd, the federal government will not be able to borrow additional funds resulting in a default on its' obligations. That could trigger an international economic crisis.
The Secretary of the Treasury Timothy Geithner warns that a default on U.S. Treasury debt could raise doubts about the solvency of financial institutions which hold treasury securities causing a run on the financial system; a threat to confidence in the financial markets could ignite a panic threatening the entire global economy.
In September 2008, the market fell almost 800 points when the House of Representatives rejected President George W. Bush's legislation calling for a $700 billion bailout of corporate America, principally the automotive industry. Vice President Cheney, the Administration's most conservative spokesman, then appeared before the Republican Senate caucus pleading for passage of the Bush package, arguing that failure to act would turn President Bush into a modern Herbert Hoover. A majority of the Republican senators supported the package which became an Act of Congress. That bailout and the Obama stimulus package in early 2009 were credited with preventing a world-wide depression.
Extensive negotiations led by Vice President Biden broke down last week when Republican House Majority Leader Cantor walked out on the talks, refusing to participate unless taxes were taken off the table. This week, President Obama has resumed negotiations insisting that reducing the deficit will require shared sacrifices on all sides, including a tax increase.
Republican Senate Leader McConnell responded that there would be no legislation which included taxes, supported by Republican House members elected last year on a platform of "no compromises."
Both political parties are responsible for the deficit and the spiraling national debt. Politics is the art of the possible and compromise. The United States was founded on compromise when the thirteen colonies could not initially agree on representation in Congress. The compromise evolved with equality in the Senate and proportionality of representation in the House.
The Simpson-Bowles Commission has identified $1.1 trillion in corporate tax earmarks which could be eliminated. Allowing tax breaks for millionaires scheduled to expire at the end of 2012, as provided by current law, would save additional billions. AARP has indicated a willingness to support social security reforms as long as they are prospective. Proposals have been advanced for trimming medicare and medicaid without depriving seniors or the needy of essential medical care. Everything has to be on the table.
Dialogue, shared sacrifices and compromise - - the essence of the democratic political process - - can produce legislation to avert a potential economic catastrophe. "Washington Watch" will keep abreast of developments on this important issue with follow-up reports.
Former Senator Arlen Specter served from 1981 to 2011 and now practices law in Philadelphia.
