While Washington bickers back and forth about who is to blame for Standard and Poor’s reducing the credit rating of the United States, and Wall Street bails out of the market, sending the Dow crashing over 600 points today, let’s look a little more closely at the reason it has come to this.
By the way, let’s be clear that despite my placing the blame in the lap of the Tea Party Republicans, they only hold the majority share of the blame. There is enough blame to distribute to every politician in Washington so that everyone gets some and still have plenty left over of somebody wants seconds.
Let’s also be completely clear. The United States can and will pay its obligations. We are not Greece, we have the capacity to pay the bills and there is no real danger of default. Late payments, perhaps, but not true default.
The debt ceiling usually is raised without so much of a blink of an eye, and it has been done for decades. Enter the Tea Party Republicans. They decided to hold the debt ceiling hostage to cram their objectives down the American throats, consequences be damned.
The Tea Party ran for office on the premise that Washington spends too much and taxes too much. I doubt many people would argue that Washington spends too much, or at the very least is wasteful and inefficient in that spending. The second point simply is not true, which I will get to in a minute.
Back to the debate, the President and other Democrats wanted an increase in the tax rate for very top earners, men like Warren Buffet and Bill Gates. We’re talking about people who make more money in an hour than most Americans make in a year. The Tea Party Republicans refused, and held the full faith and credit of the United States hostage to get their way. Their argument? These low taxes create jobs. Taxes that have been in place while the unemployment rate soared to over 9% and major corporations sit on stockpiles of cash.
Take a look at this page, which features 10 charts that show just how low the tax rates are in the United States, both compared to historical values and with other parts of the world. (Special thanks to David Brin for finding this data.)
I submit that the obstinate behavior of the Tea Party is to blame for the manufactured crisis. This group of Republicans intentionally held the country, the very citizens who voted them into office, hostage to get their way. This cannot be illustrated any more clearly than with the bill the Senate flat-out told the house that they would not pass. Rather than compromise, the Tea Party pursued and passed this bill anyway, and the senate defeated it in under 2 hours, as close to instantly as it gets for Washington.
Ultimately, legislation was finally passed by way of out-maneuvering the Tea Party. It was a compromise solution that does cut spending, but analysts have said it cuts too much too soon for a fragile economic recovery, and too little long-term to have much significant impact.
Add to the mix attempts to create a similar crisis in 2012, before the presidential election, in a blatantly obvious ploy to manufacture campaign ad material to use against the president. This was about as transparent a ploy as I’ve ever seen.
The behavior of the Tea Party Republicans over the past 6 weeks makes it very clear that their intention is not to solve the problem, but to make a statement. Common sense dictates that all-or-nothing games are extremely dangerous. Would you pull the trigger just once in a game of Russian Roulette? 5:1 odds you live, but I wouldn’t do it. The risk-reward ratio is infinite because there is no reward.
The fall-out of this manufactured crisis is very likely the destruction of the economic recovery that was tepid at best. The Tea Party doesn’t care. Jobs are not being created, and in fact, with decreased spending will be destroyed. The Tea Party doesn’t care. Fabulously wealthy individuals have tax breaks they neither need, nor in many cases even want. Jobs are not being created, and are, in fact, being shipped overseas. The Tea Party doesn’t care.
The only thing that matters to the Tea Party (economically) is the destruction of social programs that citizens paid into for decades in good faith. The Tea Party calls these entitlements. That people were taxed to fund these programs doesn’t matter. Erase the slate, destroy the program.
Standard and Poor’s justified their credit rating decrease largely on political basis. Infighting and gridlock were cited as justification for reducing the rating, not missed payments, or even late payments. This was not an economically-driven rating decrease; it was a political statement motivated by the unwillingness of the Tea Party to negotiate in good faith.
It’s shame, too. There was real opportunity for change that could have brought spending under control in the long-term, without torpedoing the weak economic recovery. In the end, it seems we got exactly the opposite, and the voters must wait over a year to voice their opinions.
