Tom Power - January 14, 2013
From One Manufactured Fiscal Crisis to Another
From One Manufactured Fiscal Crisis to Another
Many of the nation’s newspaper cartoonists have done a good job of making fun of the sighs of relief we are all supposed to have breathed when Congress and the President settled the “fiscal cliff” crisis on New Year’s Day.
Given that the “fiscal cliff” was manufactured by Congress as part of a temporary fix in the earlier 2011 stalemate over raising the federal debt ceiling, it was obvious that the same fiscal crisis was going to reemerge in early 2013 when that debt ceiling would have to be raised again.
If the House Republicans cannot get their way in the upcoming repeat performance of the debt ceiling battle, they again plan a suicide-bomber-approach to fiscal policy, namely threatening to force a purposeful but completely unnecessary default by the United States on its financial obligations. Given that the U.S. dollar and U.S. Treasury securities are the financial securities of choice that the rest of the world uses to store its wealth, what the Republicans are threatening is nothing short of a worldwide financial collapse.
What is important to understand is that the American dollar and U.S. Treasury bonds are threatened by no one but the Republicans in the House of Representatives. Despite the fact that the Great Recession originated in the United States, as it spread around the world, investors turned to the dollar and U.S. Treasury bonds for financial security. That was the safest place in the world for them to put their money.
The U.S. Constitution is crystal clear that Congress controls the “purse strings” of the federal government. It is only Congress that can mandate federal spending and federal taxation. The President and the rest of the executive branch of the federal government constitutionally then are supposed to implement those spending and taxing mandates.
The Congressional debt ceiling, however, creates a conundrum of conflicting mandates: What is the President supposed to do when Congress orders spending levels that are not covered by mandated taxes. Given that it is Congress that sets the level of spending and the level of taxation, one would think that Congress in establishing that federal budget had quite explicitly authorized whatever deficit or surplus resulted and was also authorizing the U.S. Treasury to facilitate those Congressional spending decisions.
But Congress has added a conflicting mandate: It has ordered the Executive Branch to spend and tax in a way that creates a deficit but has also ordered the Treasury to not facilitate that spending by either expanding the money supply or borrowing money. Thus the Executive Branch has to choose which of these Congressional mandates it should violate since it cannot spend the way Congress has ordered and manage the nation’s currency and debt as Congress has ordered. The President would have to violate one Congressional mandate or another no matter what he decided to do.
Such contradictory legislation might appear to make no sense. But there is political sense to it: It is a political maneuver that seeks to cut federal spending without Congress taking responsibility for specifying what spending should be cut. That allows members of Congress to avoid going on record cutting specific popular spending programs while trying, instead, to force the President to do exactly that.
We are back to the fiscal cliff of steep government spending cuts that may undermine our slow economic recovery from the Great Recession or, alternatively, force the U.S. Treasury to default on U.S. financial obligations for the first time in the nation’s history, possibly triggering a worldwide financial panic and collapse.
What the Republicans hope to get out of holding the American and world economies hostage in this blackmail scheme is what they call “entitlement reform” but is more accurately an explicit attack on Social Security, Medicare, Medicaid, Food Stamps, and Unemployment Compensation. The Republicans either do not have the votes or do not have the political guts to propose and pass specific reductions in these social safety net programs as well as drastic cuts in almost everyone’s favorite federal program. Given that they cannot accomplish what they want using the democratic legislative process, they have turned, again, to hostage-taking and blackmail.
This is outrageous, dangerous, and unnecessary extra-legal behavior by House Republicans. Since 1960 Congress has acted 78 times to adjust the federal debt limit to allow the U.S. Treasury to meet America’s financial obligations. Most of those adjustments of the debt ceiling were under Republican presidents although 37 percent of them were under Democratic presidents. This is routine government business that has always been approved so that the credit worthiness of the U.S. government was not in question. It should not be in question now either, but House Republicans want to purposely undermine our credit worthiness by keeping the U.S Treasury from meeting the nation’s existing financial obligations. This comes close to threatening the financial sabotage of the U.S. government and the American economy.
Enough is enough. We cannot make progress on any of our nation’s problems while stumbling from one manufactured financial crisis to another. Our economic hostage takers and blackmailers have to be legislatively disarmed so that we can get on with doing America’s business.