Washington has been so engrossed in the battle over the debt ceiling and deficits, it's as if lawmakers think that resolving the federal budget crisis would magically fix the country's broken economy. But the federal government's fiscal problems are just one piece of the puzzle, and the protracted debate over whether to raise the debt ceiling has obscured a more immediate issue: how to get more unemployed Americans back to work.
On Friday, bipartisan leaders of the U.S. Conference of Mayors joined the growing chorus of outside-the-Beltway groups urging Congress to raise the debt ceiling without further delay. They acknowledged that the deficit has to be brought under control and that spending will have to be cut. But they complained that lawmakers are so fixated on slashing government programs, they're not listening to the cries at the grass roots for jobs.
There shouldn't be any doubt that not raising the debt ceiling soon would make the economy even worse. If the resulting cash-flow crunch stops the Treasury Department from paying some creditors, interest expenses are likely to climb for any borrower whose rates are tied to the Treasury's. Local governments would also be unable to issue tax-exempt bonds, in addition to potentially losing vital federal aid for public safety, housing, community development and healthcare.
Unfortunately, Democrats and Republicans are having such trouble agreeing on a deal to raise the debt ceiling, there's a chance Congress won't act in time to avoid a backlash in the financial markets. That would be tragic. On Friday, House Speaker John A. Boehner (R-Ohio) pulled out of talks with the White House over a multitrillion-dollar debt-ceiling package that would cut spending and raise revenue while still lowering tax rates. The breakdown in the ambitious talks raises the likelihood of Congress being mired in endless battles over smaller spending cuts and incremental increases in the debt limit — assuming it's able to raise the limit at all.
Mayors from both parties called Friday for a balanced approach to the federal fiscal mess, in part because they fear that cutting spending too quickly and deeply would only prolong the economic malaise. It's a valid concern. The goal of a deficit-reduction plan should be to close the budget gap steadily and reliably, stabilizing the debt within four or five years. With that reassurance, businesses should be encouraged to invest and consumers to spend. The risk, though, is that the economy isn't healthy enough to absorb the job losses that would be caused by slashing spending on public programs.
The best tonic would be to include in the debt-ceiling deal some steps to promote job growth in the short term, even as overall spending is being trimmed. A good example would be an aggressive program to build highways and other infrastructure. Failing that, the next best thing would be for Congress to put the debt-ceiling debate behind it so it can start focusing on unemployment, a far more immediate threat to the recovery.