On Monday, the debt crisis hit another rough spot when The Seattle Times reported Standard & Poor’s shifted its view on the United States debt from stable to negative. Along with this shift in viewpoint, S&P also stated that the United States could lose its AAA rating, the highest rating that financial securities can have.
While this report was being sent out, The Washington Post reported Congress was debating the issue of raising the debt ceiling. The debt ceiling is the amount the government can legally borrow. The reason why Congress wants to raise the debt ceiling is because if the U.S. breaches it, the country will, in effect, default on its loans, which could affect foreign markets. Thus, the risk of causing an economic meltdown would be incredibly high.
Congress has an option to make either serious budget cuts or to raise the debt ceiling. But partisanship is driving a deep divide in Congress, which is preventing a budget plan from being passed. This division has created the possibility of the country not seeing a concrete budget plan until after the 2012 elections. That is one of the reasons why S&P was stating how it might drop the U.S. credit rating, which would make it even harder for America to bounce back from the recession.
One budget plan includes President Barack Obama’s calls for balanced cuts in all sectors, according to an April 5 article from CNN Money. The Republicans are pushing another plan spearheaded by Rep. Paul Ryan, which calls for Medicare and Medicaid to be radically restructured, for tax cuts for the wealthy and for cuts in areas such as education, according to the same article.
The so-called Ryan Plan is gaining support in the House, according to a Monday article from The Washington Times, and it might even become the framework for a compromise.
But for the Democrats to back any part of the plan, they would truly compromise their beliefs. As Ryan said about his proposed budget plan in the CNN Money article, “This isn’t a budget. This is a cause.”
But this cause is wrong.
The Ryan Plan is more about pushing a belief system down the throats of Americans than actually trying to create a budget that lowers the deficit. This can be seen clearly in its attempt to defund the Patient Protection and Affordable Care Act and in the plan’s tax cuts for the wealthy. But both NPR and the Center for American Progress report that the Ryan Plan does not truly address defense spending, which makes up about $698 billion dollars of the 2010 budget, according to the Stockholm International Peace Research Institute. As one can see, most of the plan shows more ideology than common sense.
The budget has to have cuts that, unfortunately, will hurt in some places. We have dug ourselves into a deep hole that is going to be painful to get out of. We will have to make cuts in areas of discretionary spending, and we also must raise taxes.
Former Chairman of the Federal Reserve Alan Greenspan said Sunday on “Meet the Press” that the Bush tax cuts must expire and that tax levels must go back to where they were during the Clinton administration.
Congressional Republicans want an extension on the tax cuts, and it stems from a belief in “trickle-down” economics. Beginning during the Reagan administration, the theory holds that by cutting taxes for the wealthy and for big businesses in America, the increased amount of money held by these entities trickles down to the rest of our economy, therefore raising it.
But history has shown this type of economic system did not work. According to the Ludwig von Mises Institute, Ronald Reagan and George H. W. Bush left Bill Clinton with a large federal deficit and an increased federal debt. The Clinton administration, though, helped get rid of the deficit and even reported a budget surplus in a number of those years. The federal debt also was lowered. To achieve this, Clinton had to take certain measures, such as raising the tax rate on the wealthiest Americans.
There is no doubt we have gotten ourselves into a lot of trouble with our spending. As Americans, we must make strong, common-sense choices that will not negatively affect our fellow Americans. We can no longer shy away from pain for the sake of our country, or we will fall.
Drew Curd is a freshman mathematics major from Lawrenceville, Ga.