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Fight over raising the debt ceiling almost sure to lead to bad policy

It's quite likely that any deal reached by lawmakers to stave off default is going to involve compromises that were unthinkable even a few short weeks ago.

July 24, 2011|Michael Hiltzik
  • House Speaker John Boehner of Ohio walks away from the lectern after making a statement about the breakdown of debt ceiling talks.
House Speaker John Boehner of Ohio walks away from the lectern after making… (Alex Brandon, Associated…)

For lawmakers at every level of government, there are two unalterable prerequisites for making bad policy.

One: Paint yourself into a corner. Two: Run yourself up against an implacable deadline.

Both conditions are spectacularly displayed in the ongoing Washington cabaret over the federal debt ceiling. As I write these words, President Obama and congressional leaders are locked in a high-stakes tug of war over raising the debt ceiling, which the Treasury Department says must be done before Aug. 2 to keep the U.S. from defaulting, for the first time, on its bonds.

Default is one government action sure to unite all segments of the population in shared misery — businesses will face a renewed credit crunch, job creation for ordinary citizens will crash again and people dependent on government checks may not get them.

This is what makes for cabaret: Whether Washington is displaying normal eleventh-hour posturing of the kind that makes politicians everywhere tick, or whether this time a routine congressional action will be bollixed up by a cadre of hard-liners curious to see if the catastrophe forecast by experts on both sides of the political divide will actually happen.

How routine is this vote? The debt ceiling has been raised 91 times since 1960.

The smart money says that a deal will be reached to stave off default, but even the smart money is speaking with its fingers crossed. It's quite likely that any deal is going to involve compromises that were unthinkable even a few short weeks ago.

The compromises being talked about recently involve spending cuts falling in the near term upon the shoulders of the elderly and the working class and tax increases falling heaviest on the wealthy class, to be negotiated sometime in the distant future.

Driving the resistance to tax increases is the huge bloc of congressional Republicans who have put their names to a pledge promulgated by Americans for Tax Reform, a rabidly anti-tax group headed by the inexplicably influential Grover Norquist.

This pledge is a commitment to vote against any tax increases even, presumably, if hell freezes over, as it's poised to do. The group says that 234 of the 240 current GOP members of the House and 40 of the Senate's 47 Republican members have signed the pledge, along with three congressional Democrats.

Why politicians would openly tie their own hands no matter what conditions might arise in the real world is inexplicable, except as the meanest kind of pander to party extremists. Yet there is no question that the Norquist bloc today stands in the way of a fair debt deal that balances spending cuts and tax increases. They've painted themselves into their own corner, but they leave the rest of the country to find the exit.

Typical of the compromise proposals being bruited about is one developed by the so-called Gang of Six, three Democratic and three Republican U.S. senators. Their plan, according to their descriptive handout, purports to be a "comprehensive and balanced" approach to slashing deficits. Yet they slipped into their manifesto a number of partisan, mostly conservative, hobbyhorses.

For example, the plan would tie Social Security cost of living increases to the inflation index known as the chained consumer price index. As I observed recently, this is a way to cut benefits by as much as 10% over the coming decades.

This gradual shrinkage insidiously achieves one of the long-cherished goals of conservative enemies of Social Security, which is to make it less relevant to younger generations and thus easier to kill outright.

The Gang of Six also proposes to repeal the CLASS Act, a component of last year's healthcare reform bill that creates a program of voluntary long-term-care insurance financed by individual premiums, so elderly Americans can stay out of nursing homes and off the public rolls.

Conservative hostility to the CLASS Act is hard to understand, except that the measure targets a segment of the commercial health insurance business that remains largely free of regulation. Still, congressional analysts say that the CLASS Act will reduce the federal deficit by $70 billion over 10 years (mostly because it collects premiums for at least five years before paying benefits), so repealing it seems a mite counterproductive.

Then there's the permanent repeal of the Alternative Minimum Tax. The AMT is sort of a Trojan hobbyhorse. It is popularly assumed that the tax, which was originally aimed at wealthy individuals who reduced their IRS bills to zero through tax shelters, has turned into principally a middle-class burden. This is not quite true.

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