The debt ceiling is talked about allot in the media nowadays. An increase in the debt ceiling (which is done by a vote by the representatives of the country's citizens) failed to pass on May 31 for ideological reasons. Some Republicans think that NOW is the time to stop raising the debt ceiling (something done by the GOP leaders several times from 2002 to 2008). Why should we suddenly stop following a previous policy just when we are about to do something different on the economic field? I think its because the GOP leaders have lost faith in the American ability to overcome its challenges (as Republican rule put the country on the brink on economic collapse (remember 2008-09?).
Here is what is going on:
From Fox News:
The congressman said resolving the debt ceiling issue "is crucial for our place in the world economic system," adding that he's open to all ideas to balance the budget. One option the Washington Democrat is proposing is letting the Bush-era tax cuts expire. "The deficit would go down by $533 billion," he said. "So, there are a lot of ways we can get there."
Why is it so difficult to resolve this simple economic issue? The problem is ideology NOT economics...
The old Republicans used to be sensible. Then they got old. Problem is they brought up a bunch of 'old' children as well, stuck in ideology and not aware of the facts the way Republican's used to be. [For example: My grandparents lived through the Great Depression which was so traumatic that they adopted, a 'great depression' perspective. Always worried, accumulating everything they can, wanting things not to change etc. They will often accept ideas from certain authoritive sources just because they have for a long time.]
Extract:
"It used to be that conservatism was a hard-headed set of ideas rooted in reality.
Unlike the abstract theories of Marxism and socialism, it started not from an imagined society, but from the world as it actually exists.
"This is the way things work," conservatives would patiently explain to wooly headed liberal professors. "Whatever you may want it to look like, this is what it really looks like."
But consider the debates over the economy these days. The Republican prescription is cut taxes - slash government spending, then things will always bounce back.
Now, I would like to see lower tax rates in the context of simplification and reform, but what is the actual evidence that massive tax cuts are the single best path to revive the U.S. economy? Taxes as a percentage of GDP are at their lowest levels since 1950. The U.S. is among the lowest taxed of the big industrial economies.
So the case that America is grinding to a halt because of high taxation is not based on facts, either past or present. It is simply a theoretical assertion.
The rich countries after all are in the best shape right now with strong growth and low unemployment are ones like Germany, Denmark and Canada - none characterized by low taxes."
More proof that the economic debate in the States is an ideological debate - i.e. watch the following talk between the economists on whether we should have jobs vs. whether we should be budgeting (I know I'm biased, but that sounds like my Grandparents... sensible for an individual in dire economic times but not for an economy/country). With jobs for our youth there will be a boost in demand driven by greater income. Add technological boosts and new/small business boosts and the demand in the country's economy will be even greater - i.e. we can think innovatively and succeed with the resources that we have.
[Edit: June 22 '11 - Podcast link removed and replaced with direct video evidence (below) - even CNN notes that this is an ideological debate]
Notice where it says 'in my judgement' in the following quote - another proof that this is an ideological debate...
"STOCKMAN: Yes. That's the dilemma that we're in. We're in a deflationary cycle. We can't afford to borrow more. We can't afford to create artificial demand and artificial employment. And so, therefore, we're likely to have unemployment in the teens for the balance of the teens, that is, for a decade or more.
That's the mess that we have created after 30 years of, you know, tax giveaways and lack of control on entitlements and running this massive $800 billion war budget that we don't need and can't afford. It sounds like very harsh medicine, but it happens to be reality. We cannot borrow our way out of this one, in my judgment. We're now facing the day of reckoning, literally."
Here is another direct quote (notice that what this Republican economist thinks should be done is an ideological perspective NOT an economic one {i.e. he is using metaphor of personal budgeting for understanding an economy)...
"Two years ago, Greece was borrowing two-year money at 3 percent. This morning, they're borrowing at 30 percent. There reaches a point when the bond market is no longer willing to tolerate the kind of fiscal irresponsibility we have, and I think we're very close to that, and it is very foolish to run a risk of trying to find out how much longer we can go on with this before the reaction sets in.
So, yes, I agree it would be nice if we could afford to spend money to put people to work or put money in people's pockets, although I don't think that's a good public policy. But we can't afford it. Literally, we are broke. Literally, we are at the edge of a financial calamity and we have to get beyond the idea that there is always enough balance sheet left to borrow some more money until we get to economic conditions that are more to our liking. The conditions that we have are the ones that we have to cope with, and that, unfortunately, is the fact of life today."
It is a fact of life for people. Economies function on different principles as my new REAL Economics blog will make clear. this post is just to make it clear that raising the debt ceiling an creating more opportunities and jobs VS. the current GOP leader's 'budgeting' approach to a country's economic system is an ideological one NOT an economic one.
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