In May, the United States reached its debt limit. After more than two months of debate with the threat of default looming large, the debt ceiling was finally increased this week. Unfortunately, the deal to stave off default came at the expense of critical government investment in our country’s infrastructure and its people, a proposal I could not support. Over the last 30 years, the debt ceiling has been raised cleanly 39 times, 18 times by President Reagan alone. Never before has Congress put the economy at risk in order to negotiate a debt ceiling increase.
The proposal agreed to by President Obama and leaders of the House and Senate will increase the debt ceiling through 2012 in exchange for at least $2.1 trillion in spending cuts. This deal is not representative of a balanced approach to long-term deficit reduction. Cuts of this magnitude will reduce growth and employment and increase inequality in the short term without properly addressing the structural causes behind our long-term deficits. By leaving revenue entirely off the table, the agreement severely restricts the government’s ability to make investments in the human and physical capital of this country – investments that created the strongest middle class in the world and made our country the most powerful.
Under the Clinton tax rates that prevailed during the 1990s the economy created a record number of jobs and the government actually ran a surplus for over two years – leaving a projected surplus through 2011 of $2.3 trillion. These budget deals included spending cuts and new revenues and should be the model we follow today. Reckless mismanagement by the Bush Administration, two wars, the Bush era tax cuts, and Medicare prescription drug program which pays retail rather than negotiated prices all contributed to where we are today.
Government spending currently equals roughly 25 percent of GDP, while revenues being collected are at an historically low 15 percent of GDP. This gap, which represents our yearly deficit, is unsustainable – and despite the rhetoric cannot be bridged by spending cuts alone. Allowing the Bush tax cuts to expire and a return to the Clinton era tax rates would nearly cut the deficit in half by 2021.
With its $2.1 trillion in cuts, the debt ceiling agreement validates the political strategy of far-right Republican radicals who were willing to create default and economic chaos in order to avoid true compromise and a balanced approach. Their brinksmanship has eroded global confidence in our system of government, a confidence that made the dollar the global reserve currency and the Treasury bill the world’s safest investment. CNN reported that the wrangling over this decision has already cost the U.S. $1.7 billion in additional interest on our debt.
While it is a relief the debt ceiling has been increased, the national debate we witnessed over the past few months should have never occurred. This deal sets a poor standard for future budget negotiations and will have a lasting, negative effect on our economy, preventing investment in our infrastructure and weakening our economic competitiveness. What is occurring is the equivalent of the decision during the Great Depression to rein in spending before the economy had time to fully recover. It was disastrous then and I’m afraid if we don’t change course soon history will repeat itself.
Rep. James Moran (D) is Virginia’s 8th Congressional District Representative in the U.S. House of Representatives.