Wow, it’s been a while since my last post; looks like that one was just as I was getting seriously into the training at my new job. Will have to do a personal post soon, but today, I want to talk about the debt and what’s being done (or not done) about it.
Let’s go back a decade. For the first time ever, the debt clock (which displays a running total of America’s outstanding debt) was actually running backwards, as the federal government was paying off its obligations. In 2001, of course, a number of policies changed: taxes were cut, spending was increased (over the next eight years, the size of the federal government would double), and of course we got involved in several wars. When the great recession started in 2007, the sputtering economy certainly didn’t help matters.
After Obama took office, Congress attempted to set up a deficit reduction committee, which would propose a plan that Congress would have to have an up or down vote on; it would have been the best chance at actually balancing the budget, since Congress wouldn’t have had a chance to sneak unrelated things in to buy votes. Unfortunately, the republican party filibustered the bill; while the president implemented the commission anyway, he had no authority to force Congress to vote on the commission’s recommendations. Those recommendations (and those of the “Gang of Six”, who later looked at the problem), were guaranteed to irritate everyone: cuts in both domestic and military spending, eliminating tax breaks (while reducing tax rates), increasing the federal gas tax and the amount of income subject to the payroll tax.
Democrats, of course, aren’t happy about any cuts in domestic spending, particularly in a bad economy; even businesses are warning that the recently passed cuts will cause GDP to drop approximately 3% next year. Republicans, on the other hand, have been very clear: they will not accept a single dollar in new revenue. In the republican presidential debate this week, one of the questions was which of the candidates would refuse a deficit reduction deal that included $1 in increased revenue for every $10 in spending cuts; every candidate raised his or her hand.
Right now, I’m trying to get out of debt myself. I could try to do that simply by cutting spending, and in fact I have been spending less. If I’d done nothing else last year, however, I would NEVER get out of debt; there simply wasn’t enough to cut to pay down debt and also be able to live. What I did instead was to also increase my income: I got a good job and I have projects that bring in extra money on the side. Not cutting spending would have been stupid, but so would not bringing in extra revenue. I also ended up spending more money, in order to increase my revenue (in my case, moving across the country to start a new job and paying for websites that bring in a little extra cash) – a smart move, just like government spending that stimulates the economy (and improves the infrastructure that businesses need) is a smart move.
But when one party completely rules out one side of the equation, things just aren’t going to work out. (Indeed, S&P recently confirmed that the republican party’s willingness to default rather than increase revenue is the reason that the country’s credit rating was downgraded). I’m not particularly happy with either party at the moment, but it seems to be abundantly clear that republicans cannot be trusted with the fate of the country, and if we want to get serious about actually reducing the debt, the first thing we need to do is to remove as many of them from Congress as possible.