Washington, the financial world and much of the nation are transfixed by the political stalemate over the looming national debt ceiling. Amid the charges of &amp;quot;playing to the base&amp;quot; and political posturing is the reality that voters themselves set up the current stand-off.
U.S. Senator Barack Obama was elected President in 2008 as voters handed Democrats lopsided congressional victories for the second cycle in a row. Despite having run for office on the vague promise of &amp;quot;hope and change,&amp;quot; the new president took his election as a mandate for implementing a wide range of policy changes. Those changes dramatically expanded the size and scope of the federal government setting the nation on the path toward soft European-style socialism. This was, of course, accompanied by a massive increase in spending which has triggered historic federal deficits.
In reaction to this over-reach, millions of voters became active in tea party groups and other grassroots organizations. Last year this movement re-energized the Republican Party which went on to sweep Democrats out of power in the House and diminish their control in the Senate. These new members of Congress headed to Washington determined to rein in spending and reverse the tide of government expansion.
So what we have serving in Washington are two dispirit groups of elected officials each sent to Washington on different waves of voter sentiment and each remaining loyal to the base that sent them there. The Democrat base wants higher taxes on the wealthy and more benefits for the poor and middle class. Republicans reflect the views of their constituency which want both taxes and spending to be cut significantly.
America’s two competing governing philosophies have landed fore square in opposition to each other in the debt ceiling debate. Neither side is willing to compromise because their core governing beliefs are at stake. And, while some temporary fix will be devised to get through the debt ceiling issue, it will take the 2012 elections for the future course of the nation to be decided.
There is no doubt the debt ceiling will be raised. The nation has spent – and will continue to spend – beyond its means. Slowing the rate of that spending will take time, more time that is available before the current debt ceiling it reached. So the real question is will the debt ceiling be raised and the profligate spending continue, or will there be serious spending cuts and a blueprint established for restoring fiscal responsibility?
Republicans have rallied behind the concept of &amp;quot;cut, cap and balance.&amp;quot; This consists of immediate spending cuts, in the range of $4 billion, capping future spending and enactment of a balanced budget amendment. President Obama appears willing to agree to some spending cuts, although not as many as Republicans are demanding, but has flatly rejected a balanced budget amendment.
Democrats want to raise taxes and have adroitly found several loopholes benefitting wealthier Americans to use as public relations fodder. But, the bottom line is tax hikes always depress economic growth. With the nation struggling to emerge from a stubborn recession – and job creation at a virtual standstill – higher taxes would be a dagger plunged into the heart of the economic recovery.
Having been swept into office just months ago on a promise to cut spending and not raise taxes, Republicans cannot give into Democratic demands for tax hikes. Most remember that President George H.W. Bush violated his &amp;quot;read my lips, no new taxes&amp;quot; pledge and lost the support of his party’s conservative base and ultimately the White House.
Democrats, meanwhile, have dug in on the issue of entitlement reform. Given the amount of the federal budget consumed by Social Security, Medicare and Medicaid it is impossible to contain spending without restructuring these programs and restoring their financial stability. House Minority Leader Nancy Pelosi has drawn a line in the sand vowing to oppose any diminishment of entitlements.
And so we have an irresistible force meeting an immovable object. Each side was sent to Washington by voters with different instructions on what to do. This makes it highly likely no long term solutions will emerge from the current crisis, but rather look for some clever gimmick that merely kicks the can down the road. Next year, voters will come to a fork in that road and will have to make a historic decision on which path to take.
(Lowman S. Henry is Chairman &amp; CEO of the Lincoln Institute and host of the weekly Lincoln Radio Journal. His e-mail address is [email protected])
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