The Debt Limit Must Be Raised

Everything Is Compromise

“In war, the strong make slaves of the weak, and in peace the rich make slaves of the poor.” – Oscar Wilde, 1854-1900.

Congress will raise the debt limit. If Congress doesn’t raise the debt limit in the next few days – before August 2nd at the very latest – the world will face economic collapse. Yes, there are Teabags who hope that will happen, but there will be enough “cool heads” to avoid default and its dire consequences. Congress will raise the debt limit.

What is despicable is how long this whole process is taking. It is not something new, something out of the blue.

In June, 2002, Congress raised the debt ceiling to $6.400 trillion; in May, 2003, to $7.384 trillion; in November, 2004, to $8.184 trillion; in March, 2006, to $8.965 trillion; in September, 2007, to $9.815 trillion; in July, 2008, to $10.615 trillion; in October, 2008, to $11.315 trillion; in February, 2009, to $12.104 trillion; in December, 2009, to $12.394 trillion; and in February, 2010, to the current limit of $14.294 trillion. (See http://www.ritholtz.com/blog/wp-content/uploads/2011/05/hist07z3.xls.)

The only question left is how the compromise will look. We are involved in the age-old conflict over what government should do and how it should be paid for.

The Republican Party discovered a few decades ago that the best way to influence the electorate was to select only a few very simple messages and repeat them until people start believing them to be true, ignoring all facts and complications and nuances. The utter and obvious inanity of St. Ronald Reagan’s assertion that government can’t solve our problems because government is our problem didn’t stop him, or his many disciples in the intervening years, from making it.

The current message is equally simple and equally inane: “We don’t have a revenue problem. We have a spending problem.” The only basis for this assertion is repetition, and they all repeat it. It falls apart if you give it the most casual inspection, but they still repeat it.

You can certainly find fraud, waste, abuse, duplication, redundancy, tautology, inefficiency, obsolescence, obstinacy, inequality, cronyism, paternalism, elitism, and all sorts of well-beaten-but-still-well-funded dead horses in the federal budget, and there is a lot of money that can be saved by weeding these things out, but doing so is not going to solve our fiscal problems.

You can cut the throats of those already hurting the most by cutting unemployment compensation, nutrition assistance for pregnant women, Food Stamps, literacy programs, home care, and Medicare, Medicaid, and the Affordable Health Care Act, but doing so is not going to solve our fiscal problems.

You can curtail the space program and let our highways and railroads and water lines and sewer lines and electric lines all go unmended, but doing so is not going to solve our fiscal problems.

You can get the government out of the business of regulating business, but in doing so you will allow a return to the excesses of the banks and stock brokers, and the poisoning of our food, air, and water; you will permit child labor, illegal immigrant labor, and labor under unfair and hazardous conditions – and doing so is not going to solve our fiscal problems.

Yes, we have a spending problem – but we have a much greater revenue problem. In order to put a cap on our federal debt, we’re going to have to stop operating at a deficit, and that means we need to bring in a lot of money.

Unfortunately, you can’t just raise the taxes on the obscenely rich, or the filthy rich, or the extremely rich, or the very rich, or the rich, or even on everybody and everything that moves, and solve our fiscal problems.

What we must do is get our engine running again, running well and leaving everybody else in its dust. This is something we have done many times in our history, and there is absolutely no reason why we can’t do it again.

To do this again we need to support education and research and development. We haven’t been doing those things very well recently. The cumulative knowledge and awareness of the average U.S. citizen is woefully inadequate to the needs of the present era. We have to fix that.

We used to expect our high school graduates to know how to read, write a legible sentence, make change, know the basics of government and geography, and have a measure of common sense. These days we can’t even expect that of our college graduates! Our children won’t be able to invent the new technologies we need with that kind of preparation. Children in other countries will have that ability.

We need to use our technological prowess to guarantee we will keep that prowess. We have the tools to reform our educational system, and we need to use them. Our present school is modeled after Henry Ford’s assembly line, and it doesn’t work.

We need to use our technological prowess to reform our medical system from top to bottom. We used to spend about five percent of our money for medicine, but today we’re getting close to spending a quarter of all our income to stay healthy or tend to our illnesses. We can’t keep doing that.

We need to re-evaluate our military position in the world. After World War II, when Europe was in shambles and the Soviet Union was spending every extra ruble on war toys, it was appropriate for us to take the lead. Things have changed. Other countries need to start spending more to help protect the world, and we need to spend much less. We need to use our technological prowess to create a smaller but more efficient military machine, and use it very sparingly.

We need to re-evaluate how our government and our nation interact with corporations. We need to reward those that provide good jobs at home and penalize those that move their jobs elsewhere. We need to restrict corporate donations to elected officials, even if that means we have to amend the Constitution. We need to restrict financial institutions and watch them carefully.

We need to develop new sources of energy and recognize the influence of the petroleum industry over our elected officials. This industry is as outdated as our schools are.

And those are just the first things that come to mind. We have to start collecting more than we spend so we can start paying down our debt. To do that we must energize the economy and ensure that it will continue to be viable. We can cut spending and we can increase revenue through new taxes or tax reform, but we must rev up our economic engine to get out of the hole we’re in.

But first, we have to raise our debt limit again. If we don’t we’re doomed to experience a depression of huge scope and duration, and we’ll bring the rest of the world down with us.

Congress will raise the debt limit. The sooner the better.