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This week, House Speaker John Boehner and House Budget Committee Chairman Paul Ryan made two important if largely overlooked admissions regarding the U.S. national debt. While Boehner told ABC News that "we have no immediate debt crisis," Ryan similarly acknowledged to CBS News, "We do not have a debt crisis right now." That is indisputably true. After all, the annual budget deficit has been almost halved since Barack Obama first took the oath of office and has fallen at the fastest rate since World War II. And over just the past two years, Washington has already reduced the forecasted national debt over the next decade by $3.9 trillion.

Despite the improving debt situation, Speaker Boehner announced Thursday that Republicans will once again hold the debt ceiling hostage unless the GOP's latest demands for draconian cuts in the size of the federal government are met.

In August 2011, Senate Minority Leader Mitch McConnell described the GOP's debt-limit extortion as "a hostage that's worth ransoming." Now, Politico reports, House Republicans are once again threatening to kill the U.S. economy if the social safety net isn't gutted:

First, House Republicans are considering passing a bill in April to prioritize government payments if the nation defaults on its debt. The idea, which was discussed recently at a private meeting of top elected Republican lawmakers, would allow the GOP to say it is preparing options if Washington cannot come to a debt ceiling agreement. It's also meant to disarm Obama of the ability to say which government services he will provide in case of default...

House GOP leadership is also eyeing several bills to hike the debt cap with different budgetary reforms -- those bills might hit the floor as soon as May. One option under discussion includes trying to tie tax reform to the debt ceiling. Republicans are also mulling another path, which would tether entitlement reforms Obama has previously supported to the debt ceiling. Those reforms include increasing the Medicare eligibility age, means testing Medicare and changing the formula for calculating government benefits.

Another scenario -- described by some GOP insiders as ideal -- would have Congress agree to $2 trillion in savings, which would get as much as a two-year extension of the debt ceiling.

As we'll see below, these proposals represent the next step in the Republicans' unprecedented brinksmanship over the debt and dismantling government.

After all, since 1980 the debt limit has been raised 40 times. (Boehner, Ryan, Eric Cantor and Mitch McConnell were among the Republicans who voted for seven increases while President Bush nearly doubled the national debt.)  But never before has one party had both the intent and the votes to trigger a default by the United States. And the kinds of conditions the GOP now seeks to attach are a new blackmail that could put the entire America economy at risk.

We know this not just from the warnings of the Obama administration but from because John Boehner and Paul Ryan told us so. After all, during the last game of debt ceiling chicken in 2011, Ryan admitted, "You can't not raise the debt ceiling." And as the newly minted Speaker Boehner warned:

"That would be a financial disaster, not only for our country but for the worldwide economy. Remember, the American people on Election Day said, 'we want to cut spending and we want to create jobs.' And you can't create jobs if you default on the federal debt."
Or, it turned out, even threaten to default, as plummeting consumer confidence and battered job creation in the summer of 2011 showed.

Yet, House Republicans are preparing to do it all again. Even though, they tell us, there's no debt crisis now.

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Comment Preferences

  •  Deficit numbers you present are not (3+ / 0-)
    Recommended by:
    valion, Jon Perr, VClib

    the whole story.  From the CBO report (pdf here):

    Under Current Law, Federal Debt
    Will Stay at Historically High Levels
    Relative to GDP

    The federal budget deficit, which shrank as a percentage
    of GDP for the third year in a row in 2012, will fall again
    in 2013, if current laws remain the same. At an estimated $845 billion, the 2013 imbalance would be the first deficit in five years below $1 trillion; and at 5.3 percent of GDP, it would be only about half as large, relative to the size of the economy, as the deficit was in 2009. Nevertheless, if the laws that govern taxes and spending do not change, federal debt held by the public will reach 76 percent of GDP by the end of this fiscal year, the largest percentage since 1950.

    With revenues expected to rise more rapidly than spending in the next few years under current law, the deficit is projected to dip as low as 2.4 percent of GDP by 2015 (see Summary Table 1). In later years, however, projected deficits rise steadily, reaching almost 4 percent of GDP in 2023. For the 2014–2023 period, deficits in CBO’s baseline projections total $7.0 trillion. With such deficits, federal debt would remain above 73 percent of GDP— far higher than the 39 percent average seen over the past four decades. (As recently as the end of 2007, federal debt equaled just 36 percent of GDP.) Moreover, debt would be increasing relative to the size of the economy in the second half of the decade.

    What that report says is that under current law -- i.e., the additional revenues from the fiscal cliff deal AND the sequester cuts remaining in place -- we are in pretty good shape for 2 years or so with respect to the deficit, but not necessarily with respect to the debt.  

    That is because, with the fiscal cliff deal in place, we will be back up to relatively high historical levels of revenue (about 19% of GDP starting 2014).  And, with the sequester in place, we're back down to about where we need to be spending-wise (22% of GDP).  The CBO numbers are charted for easy reference here.

    In other words, if we leave present tax policy AND the sequester in place, we're ok for a couple of years with respect to the size of the deficit, but even then the debt is still extraordinarily high.  

    Moreover, as everybody recognizes, the big problem comes at the end of the decade, and it's driven by entitlement spending.  If we do nothing about entitlement spending, in 10 years, we will have to (according to Krugman) implement some rationing of end of life care AND implement a broad based VAT tax (or what Krugman calls "death panels and sales taxes").

    So sure, you can take the Krugman view and say, "we won't address entitlement spending for 10 years or so," and then implement "death panels and sales taxes," or you can do something now to  bend the cost curve on entitlements and try to avoid such drastic solutions 10 years from now.  

    •  OR (0+ / 0-)

      create a public option on the health care exchanges moving toward single-payer health care and of course remove the cap on income subject to SS taxes while increasing SS taxes for all roughly $.88 per week as suggested by Dean Baker.

      •  So, you want to "end Social Security as (1+ / 0-)
        Recommended by:

        we know it"?

        remove the cap on income subject to SS taxes while increasing SS taxes for all roughly $.88 per week as suggested by Dean Baker.
        Because if you just remove the cap completely, and tax all income (earned or not) without paying hundreds of thousands of dollars in retirement benefits to millionaires and billionaires, that's what you'd be doing, as I -- and others -- have pointed out over and over.

        At any rate, Social Security is not the big driver of the long-term problem.  You can bring insured wages back up to 90% of all wages and make it pretty sustainable for a long while.  There's no need to "end Social Security as we know it."  

        It's Medicare that's a very very very big long term problem. PDF here.  And, much as I am dismayed by those on the right who use the debt ceiling as a hostage, I am equally dismayed by those on the left who say, "Don't touch Medicare!"  Both are equally delusional.  

        So, show me the Democratic Senator, member of the House (or President, for that matter) who has put on the table a legitimate solution (i.e., one that adds up, numbers wise, to something that makes a significant difference) to the long-term Medicare problem of the magnitude outlined in the Medicare Trustees Report.

    •  Completely Agree About Longer Term, But... (1+ / 0-)
      Recommended by:

      Your take on the CBO numbers is spot on.  Over the next several years, the deficit situation improves.  But over time, the debt picture worsens, as health care (and especially Medicare costs) threaten more red ink.  (For more, see here.)

      The issue isn't whether the federal government should be planning for that longer term, but why action should be tied to the debt ceiling vote.  Again, this isn't just unprecedented (or was, until 2011).  The GOP threat to trigger a U.S. default could produce an economic cataclysm far worse than any projected increase in the U.S. debt.

      It's also worth noting that had the U.S. gone over the fiscal cliff, the debt situation would have improved dramatically.  But the near-term economy would have been battered and sent back into recession as the CBO forecast and the UK can testify.

      •  Here's why the focus on the debt ceiling, I think (1+ / 0-)
        Recommended by:

        it's because (1) everybody who is sane recognizes that something significant has to be done about Medicare costs over the long term; but (2) there is no political will to do something significant about Medicare costs over the long term.  

        So, those who think that something has to be done to address the long-term debt picture think that if they don't cause a crisis, it will never happen.  

        I agree with you that the debt ceiling is a horrible hostage to take, and I agree with you that default would be catastrophic.  I am NOT someone who says, "go ahead and default.  No big deal."  What I AM saying is that Washington is so dysfunctional that some people can't see any other way of making the significant reforms to Medicare that are necessary to avoid "death panels and sales taxes" OTHER THAN using a crisis to make it happen.  

        Yes, I am very unhappy with politicians on the right using the debt ceiling as a political ploy.  I think that's a horrible tactic.  But, at least they are recognizing that there's a big, big, big problem, in the long term, with Medicare. (See the Medicare Trustees Report, pdf here.) Frankly, the cries from the left about "don't touch Medicare" only reinforce the view that, unless there's a  crisis, nothing will happen, and we will be looking at Krugman's solution of "death panels and sales taxes" in ten years.   If politicians on the left would at least recognize the necessity about significantly reducing the growth in Medicare spending, and put their own solutions on the table with real numbers (and no, negotiating for drugs is not nearly enough) then I think you would hear much, much more condemnation of those on the right from people (like me) are are less partisan than practical.  

        •  What Often Gets Overlooked... (1+ / 0-)
          Recommended by:

 how much Democrats in general and President Obama have already done and are willing to do to slow the growth in Medicare spending.

          After all, Obama hasn't just put $400 billion more in cuts on the table in pursuit of his "grand bargain."  The Affordable Care Act contains several measures to change the way hospitals and physicians are compensated by moving away from a strictly "fee for service" model.  Those new incentives are already having an impact, as Medicare hospital readmissions are down.  In addition,  to further control costs when they exceed yearly targets, the Independent Payment Advisory Board (IPAB) can make recommendations Congress can override.

          As it turns out, Medicare cost growth has slowed dramatically over the last several years.  (How much of this has to do with the recession and how much with reforms in the medical system is a subject of hot debate.)  But if these lower growth rates continued, the future of Medicare and the U.S. national debt looks much more promising.

          Of course, the Ryan House GOP budget repeals Obamacare benefits (though not its revenue), so all of these cost-reducing reforms are lost.  Instead, it looks to an unproven premium support model to drive down costs through "competitive bidding" in the private insurance market.  As I explain in the piece below, there are a lot of reasons to believe the GOP has it all wrong on that and other assumptions:

          "How the GOP Gets It All Wrong on Medicare in Five Charts"

          •  I'm not putting any stock in the Ryan Budget (1+ / 0-)
            Recommended by:

            or the GOP projections.  

            What I'm relying on is the Medicare Trustee's Report (pdf here)

            that's the 2012 Report, AFTER the ACA is factored in.  And even assuming the most optimistic outcomes from the ACA about cutting costs (which the report says is far from certain), Medicare is still very, very unsustainable over the long term.  The most OPTIMISTIC assumption (assuming the most optimistic outcomes from the ACA, and good economic growth) says that,  if we continue to do the doc fix, Medicare will grow to 10% of GDP.  That's wildly, wildly unsustainable.  (In good years, that's over half of all revenue the federal government takes in going to Medicare alone.)  

            We'll see what the Trustees Report for 2013 says when it comes out next month.

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