Obama punts on debt and deficit

Ever since the 112^th Congress convened in January the nation has been treated to futile shadow boxing between it and the President over the onrushing debt and deficit crisis.  With the possible exception of the Senate’s Gang of Six, none of those responsible for averting a national economic crisis has been willing to face into the painful decisions that must be taken.

While there is plenty of blame to go around, it is inescapably clear that the President’s unwillingness to engage these issue is at the heart of the problem.  Last December his National Commission on Fiscal Responsibility and Reform spoke the terrible truth.  They told him and us that by 2025 government revenue will only finance interest payments on the debt and Medicare, Medicaid, and Social Security.  Every other Government activity would have to be paid for with borrowed dollars.  By 2020 interest payments on our ballooning debt will reach $1 trillion.  By that time our accumulated debt will have put America at risk to foreign creditors who own one-half of our debt.

But in his State of the Union address and in his budget for fiscal year 2012 the President punted.  He has refused to employ the leadership that only the President possesses to come to grips with this crisis.  The problem has been made worse by the fact that the Republicans, who control the House of Representatives, have not stepped up to the plate either.  Led by the Freshmen class of Tea Party ideologues, the House GOP has proposed to slash discretionary spending, while being unwilling to address the real problem: the three big entitlement programs—Medicare, Medicaid, and Social Security.

Soon now all of these feckless politicians are going to have their bluff called.  Sometime between the end of this month and mid May the United States will reach the statutory debt limit.  If Congress does not raise the limit, the result will be default by the Government of the United States.  Its consequences will be catastrophic.

Breaching the debt limit would mean that the Treasury could not borrow in order to pay its obligations, and the full faith and credit of the United States would be violated. In a letter to Congress in January Treasury Secretary Geithner outlined the consequences of such a breach.  Interest rates on the American people and business would rise sharply.  Equity prices and home values would decline. Unemployment would increase and businesses would fail.  The nation’s preeminent position in the international financial system would be compromised.

Geithner concludes by stating that the consequences of default would cause damage to the economy that could be, “potentially much more harmful than the effects of the financial crisis of 2008 and 2009.”

If all of this is too dense for you, rent the action movie, Unstoppable, starring Denzel Washington and Chris Pine.  Obama and Boehner would do well to watch it too.  Maybe it would stiffen their spines.

LeRoy Goldman

March 23, 2011

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