Archives for posts with tag: debt ceiling

As the after effects of Congress’ debt deal last week continue to reverberate through ratings agencies, financial markets and Capitol Hill, it is a rather menacing task to consider the reality that last weeks’ increase of the national debt ceiling hardly puts to rest the fierce, partisan dissent which plagued the legislation process.  In a sense, the deal simply kicked the proverbial can down the road to November, leaving the country with a wholly unsatisfying resolution, a fact most notably reflected in Standard & Poor’s decision to downgrade the national debt.  As the bipartisan “super committee” readies itself to inevitably reignite the political fire, one topic which will certainly be on the negotiation table is the issue of government revenues, a mostly euphemistic term for taxes.  As a recent editorial in The Atlantic points out, it is somewhat surprising that the especially tax-averse Republican Party did not more seriously consider the tax expenditure compromise, one which would not only increase government revenue (a Democratic objective) but in fact lower marginal tax rates.  As the article also suggests, Republicans stand to not only gain from the popularity of lower tax rates and willingness to seek a truly bipartisan solution, but may also achieve their goal of reduced governmental role in domestic consumer and industrial decision-making.

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On Friday, the United States Labor Department released a report showing that the United States economy added only 18,000 new jobs last month.  This correlates to a rise of the unemployment rate to 9.2%, a fact that was immediately reflected within the financial markets as the recovery stubbornly creeps along.  For President Obama, the timing of this news is especially troubling as he continues to try to hammer out a deal to increase the national debt ceiling.  As the 2012 election year approaches, and the economy remains at the forefront of the national conscience, the continuing economic struggles offer welcome ammunition for the President’s critics.  As addressed in this article from The Atlantic, incumbent candidates have not done particularly well in their re-election bids when high unemployment persists.  The author believes the President is not at fault for the dismal progress, and given the many times frustrating inability to quantify the benefits and drawbacks of an economic approach, it is hard to definitively confirm or refute her claim.  Yet while academically it is difficult to implicate the President for the current state of affairs, the more important question moving forward is how effectively the Republican party can use the economy politically to realize their goal of displacing the Democratic party from the White House.

As the August 2nd deadline for increasing the federal debt ceiling approaches, both parties continue to drag their feet finding common ground and reaching a compromise.  The Atlantic ran a piece addressing how an idyllic Washington might find compromise on the debate by both raising the ceiling and addressing the structural inefficiencies that continue to perpetuate our current deficit problems.  Much of the article follows recommendations made by the Bowles-Simpson Deficit Commission as a primary source for inspiration to both cut spending and lower overall tax rate while closing tax expenditure loopholes and reducing the deficit.  Unfortunately, this idealism is hard to share given the political grandstanding which continues to plague the negotiation process.  Yet while Republicans and Democrats continue to bicker over whether decreasing spending or increasing the tax rate is the fundamentally best way to reconcile the deficit, as Greg Mankiw points out in this older op-ed article, their difference lies mainly in political spin.

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