Partisan Politics Hinders Debt-​​Ceiling Deal

Con­gress and Pres­i­dent Obama have yet to reach an agree­ment to raise the nation’s debt ceiling, a neces­sity to ensure that the United States is able to meet its finan­cial oblig­a­tions. William Dickens, a Dis­tin­guished Pro­fessor of Eco­nomics and Social Policy at North­eastern, said that the U.S. economy could slide into depres­sion if a deal is not agreed upon by the Aug. 2 dead­line.

Why does the nation need to raise the debt ceiling, and what are the con­se­quences that could be expected if a deal is not in place by the Aug. 2 deadline?

The US gov­ern­ment is com­mitted to pay out nearly a tril­lion dol­lars more over the next year than expected rev­enues will pay for. If we don’t raise the debt ceiling, and no way can be found around it, there will be large deep cuts. These will be felt both by the people who rely on the ser­vices that sud­denly won’t be there and by the country as a whole as the money that doesn’t get spent reduces demand for the work done by other people and causes higher unemployment.

What should be a larger pri­ority for the nation: addressing the budget deficit or dealing with unem­ploy­ment and an eco­nomic recovery from the recession?

We have two prob­lems. One is urgent and the other is not. The urgent problem is unem­ploy­ment and the only thing we can do right now to reduce unem­ploy­ment is for the gov­ern­ment to make more of an effort to create jobs. That means wors­ening the other problem which is the long term sus­tain­ability of our fed­eral deficit. But that is really not urgent ande is a problem that would be easily fixed if the people in con­gress weren’t so polar­ized over how to do it. Restore the Bush tax cuts, make a few adjust­ments to the pay out for social secu­rity, and cap medicare pay­ments and agree on a way to admin­ister the pro­gram if it comes up short, or increase taxes for medicare to the point where it pays for itself.

Why are polit­ical leaders unable to reach a deal on raising the nation’s debt ceiling?

This is totally unprece­dented. The Repub­li­cans are trying to force their will for much smaller gov­ern­ment and the elim­i­na­tion or severe cut­backs of very large parts of enti­tle­ment pro­grams like Social Secu­rity and Med­icaid by holding the country hostage. Despite that, Pres­i­dent Obama has offered a set of budget cuts to meet the demands of the Repub­li­cans, and the Repub­li­cans have repeat­edly refused because the pres­i­dent wants to pair them with rev­enue enhance­ments. But they say we cannot do any­thing to increase gov­ern­ment rev­enues, even though anyone who has taken a serious look at the budget deficit knows that we cannot close that gap purely with spending cuts without elim­i­nating very pop­ular pro­grams that even most Repub­lican voters support.

– by Matt Collette