Real Talk: The GOP's Debt Ceiling Stance Is Economic Nonsense


President Obama and House Speaker Boehner's dueling debt ceiling speeches did not make news.* The plane is going down, and both pilots told their side of the fuselage that the other guy is responsible. (Both sides knew that already, didn't they?)

The instant analysis after the addresses went like this: MSNBC said Boehner was political, and Fox News said Obama was political. They're both right. The debt ceiling is a political instrument, after all. The president wants a long-term deal because he thinks another debt ceiling showdown will hurt him in 2012. Republicans want to schedule another debt ceiling showdown in 2012 for the exact same reason. Don't ask who's being more political. 

Instead, ask whose political interest is best for the economy. My answer: A long-term debt ceiling deal that backloads spending cuts reduces the possibility of default before 2013 and allows Washington to spend its time on something, anything, that might increase job creation.

It's hard to see how the Republicans' position upholds their own economic principles, much less demonstrates an ability to work within a divided government.

--Republicans say they want to promote job growth. But by insisting on upfront spending cuts, they'll reduce overall demand, force massive state and local layoffs, and reduce help to the unemployed.

--Republicans say they want to eliminate uncertainty in the economy. But after pushing negotiations to the brink of default, many are insisting on holding this fight between one and three more times before the 2012 election, which multiplies the chance for a financial crisis.

--Republicans say they want to reduce the deficit. But they've rejected a $4 trillion deficit reduction package over a small portion of tax increases, even though effective tax rates are at their lowest since before Reagan's tax cut, and even though tax increases were a part of budget reform under both Reagan and the first President Bush.

--Republicans say they want to appease the rating agencies. But S&P has said it prefers Sen. Reid's all-at-once approach precisely because it doesn't try to ensnare the president in another debt ceiling debate in an election year.

--Finally (and least importantly) Republicans routinely appealed to popular opinion polls to criticize the stimulus, health care reform, and the White House. They've been notably quiet on polling showing a consistent preference for tax increases in the debt ceiling deal. Republicans call higher taxes on the rich "class warfare." If that's right, America is overrun with class warriors.

Go ahead and blame the White House for having political interests in this showdown. But at least ask yourself: Which group has proposed to give up more to reach a consensus on an issue critical to the U.S economy? The White House, which has offered to give up entitlement cuts, the Senate Democrats who have offered to give up tax increases, or Republicans who have rejected both concessions? 

* It didn't make news, because it didn't make headway. The president pushed a compromise that includes higher taxes. That proposal is all but dead since the president endorsed a Senate plan with 100% spending cuts. The Speaker counter-offered with 100% spending cuts. But his plan all but dead, too, since his own caucus is demanding further concessions like a balanced budget amendment.


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Derek Thompson is a senior editor at The Atlantic, where he writes about economics, labor markets, and the entertainment business.

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