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.
The debate over the United States national debt limit continues to rage on as both parties fight to structure a deal to reconcile the current debt ceiling which, if not raised by August 2nd, could result in a default on the federal debt. Should such an event occur, the ramifications could be globally drastic. U.S. debt is generally regarded as the benchmark for default safety, with other bond’s risk often measured versus the Treasury benchmark. A default could therefore result not only in a downgrade of national debt and increased bond interest rates, but also a fundamental shift in the world’s perception of U.S. debt as a safe haven in times of crisis. Given the far-reaching implications of such a default, Congress remains frantic in their search for a mutually agreeable bi-party solution. Tuesday, the GOP majority House rejected Democrats’ proposal for an outright limit increase with no stipulations on government spending or policy. Republicans, meanwhile insist on a bill which requires any increase in federal debt to be matched and offset by a reduction in federal spending and House speaker John Boehner reportedly received a letter today signed by 150 leading economists supporting this plan. Boehner noted that integral to the GOP proposal is the idea that any further increase in the national debt issuance without spending reductions will crowd out “private sector job creation in America” and will continue to perpetuate an unsustainable cycle of debt-funded spending.
Earlier today, the 112th Congress convened and Republican John Boehner was officially sworn in as the 61st Speaker of the House, giving the GOP a majority vote in the House for the first time in 4 years. While no significant legislation was addressed today, federal spending is sure to be a high priority, and highly contested, issue on the docket in the coming weeks. Republicans have remained adamant in their promises to significantly cut spending levels but have been vague in their targets aside from exempting military spending, a reality which has left many on both sides of the aisle uncertain and curious as to where these cuts will come from. The coming weeks will certainly be an intriguing time to watch and see as to how and where the new Congress plans to curb government spending and what effect their actions will have on the economic recovery.
By Patrick Margolis on July 22, 2010 10:00 AM
TOBACCO DARLING BOEHNER KICKING HIS HABIT: House Minority Leader John Boehner (R-Ohio), a long-time smoker, had stated his intentions to quit smoking in an effort to encourage a friend to do the same, The Hill reports. “I have a close friend who also smokes. He has some health issues, his doctors urged him to quit smoking. And I told him, if he’d quit, I’d quit,” Boehner told the paper. Though quitting smoking may prove beneficial to the congressman’s long-term health, it could harm his financial health: Boehner is the second-ranking congressional recipient of money from tobacco companies this election cycle, receiving $25,000 since January 2009, the Center for Responsive Politics‘ research indicates.
DEFENSE PACS MOBILIZE CAMPAIGN MONEY: As Congress mulls cuts to the defense budget, the defense industry has responded by giving ever-larger sums of donations, the Center’s research shows. The political action committee for Lockheed Martin, for example, has donated $2.35 million during the 2010 election cycle — $128,000 more than it donated for the entire 2008 cycle and more than double its expenditures for the 2000 cycle. Boeing’s PAC, meanwhile, with its $2.18 million in contributions this cycle, has surpassed any other previous cycle by almost $300,000 and stands about three times greater than its $752,426 in contributions for the 2000 cycle.
DEMOCRATS BUY TIME: The Democratic Congressional Campaign Committee has reserved more than $5 million worth of airtime during the two weeks preceding November elections, The Hill‘s Sean J. Miller and Shane D’Aprile write. In the two weeks before the election, the Democrats have reserved airspace in 50 television markets in what they expect to be the toughest elections. The move is likely to cut advertising costs substantially — between 20 and 50 percent — compared to purchases closer to the election. Some strategists have suggested that the move subtly conveys advertising plans to allow friendly, third-party “527” groups to adjust their strategies accordingly.