Washington's Debt Rattle

In which we drop in on fiscal negotiations in south of the border, then retreat in mortal terror that the U.S. is headed to hell in a debt-laden handbasket.

The United States is less than three weeks away from hitting its debt ceiling, which means the government will face an immediate 44 per cent cut to its budget on Aug. 2 if no deal is reached to raise the ceiling by then. David Frum, writing on his site, FrumForum.com, notes that the last time such a correction happened was waaaaaay back in 1946, due to the draw down of government spending during the Second World War. Unlike then, however, there isn't nationwide jubilation over the defeat of the Nazis, consumers are “tapped out, still deeply in debt from the housing bubble, and facing the continuing depreciation of the most important consumer asset, housing,” and the U.S.'s international credibility will likely take a huge hit if no deal is struck. Which leads Frum to ask his counterparts in the GOP, “why are we doing this again? To force budget cuts that could be achieved just the same through the ordinary budget process? That’s it?” Yep. That's it.

Adding to the GOP's woes is the fact that Speaker of the House John Boehner is rapidly losing the faith of his fellow Republicans because of his willingness to actually work with President Barack Obama on the debt problem, observes The New Republic's Jonathan Chait. That he was even open to discussing Obama's tax-raise proposal means Boehner forgot “he was serving at the pleasure of a party inalterably opposed to the sort of bipartisan compromise he envisioned,” says Chait. “In any case, Boehner woke up from his fantasy world and faced the deranged reality of the party he’s actually leading.” And that's a party that has abandoned any pretence of putting the state's well-being ahead of its partisan interests. Considering where that's got them – heck, David Frum sounds like he's about to jump ship – Boehner might be better off riding into the sunset before his party can do it for him.

Kelly McParland of the National Post, hardly a liberal, imagines that Obama stands to benefit the most from the mess, even if a deal isn't struck, all because he's become the only reasonable voice in the debt discussions. By signalling he's willing to compromise on cuts to Medicare and other social programs while calling for tax raises, Obama's told his critics, both Democrats and Republicans, that “the economy is in a mess and it’s time to quit stalling.” The GOP is sticking to the tried, tested, and, well, not-true-at-all mantra that raising taxes will kill the economy, while the House Democrats threaten to raise a stink if Medicare gets trimmed – “It’s hard to denounce Obama as lacking in leadership or courage when he’s telling the entire country he considers the debt debate more important than his own future,” says McParland. Which is a hell of a way of ensuring that his future will be in the White House through to 2016.