Reviewing the Dueling Debt Speeches

Last night, both President Obama and Speaker Boehner gave speeches regarding the debt limit debate going on in Washington, D.C.  I did not watch the speeches, but I did read the text of both of them.  Here are my thoughts as I read them (if you would like to read them, you can read the president’s here, and the speaker’s here):

Obama and Boehner

President Obama’s Speech – The Good Parts

“But if we stay on the current path, our growing debt could cost us jobs and do serious damage to the economy… Businesses will be less likely to open up shop and hire workers in a country that can’t balance its books.”

“Because neither party is blameless for the decisions that led to this problem, both parties have a responsibility to solve it.”

“We all want a government that lives within its means, but there are still things we need to pay for as a country -– things like new roads and bridges; weather satellites and food inspection; services to veterans and medical research.”

President Obama’s Speech – The Bad Parts

“As a result, the deficit was on track to top $1 trillion the year I took office.”  For goodness’ sake, man, is there nothing you can’t blame on Bush?

“Now, every family knows that a little credit card debt is manageable.”  Don’t worry, we can keep borrowing, and nothing will happen… look very carefully at this pendulum and repeat after me…

The Balanced Approach = serious, historic spending cuts + tax increases for the “wealthiest Americans” + tax increases for the “biggest corporations” + “raise the debt ceiling”

The “Kill Grandma and Our Middle Class,” Unfair Approach = “cuts-only approach” + “raise the debt ceiling”

“Understand – raising the debt ceiling does not allow Congress to spend more money.  It simply gives our country the ability to pay the bills that Congress has already racked up.”  Really?  If we didn’t raise the debt ceiling, we would still spend the same amount of money?  Not so.

Speaker Boehner’s Speech – The Good Parts

“The United States cannot default on its debt obligations. The jobs and savings of too many Americans are at stake.”

“You see, there is no stalemate in Congress. The House has passed a bill to raise the debt limit with bipartisan support. And this week, while the Senate is struggling to pass a bill filled with phony accounting and Washington gimmicks, we will pass another bill – one that was developed with the support of the bipartisan leadership of the U.S. Senate.”  It’s good to see that the House and Senate are working together.

“There is no symptom of big government more menacing than our debt. Break its grip, and we begin to liberate our economy and our future.”

Speaker Boehner’s Speech – The Bad Parts

“President Obama came to Congress in January and requested business as usual — yet another routine increase in the national debt limit — we in the House said ‘not so fast.’ Here was the president, asking for the largest debt increase in American history, on the heels of the largest spending binge in American history.”

The Speaker’s speech seemed more partisan than the president’s speech: “Here’s what we got for that spending binge: a massive health care bill that most Americans never asked for. A ‘stimulus’ bill that was more effective in producing material for late-night comedians than it was in producing jobs. And a national debt that has gotten so out of hand it has sparked a crisis without precedent in my lifetime or yours.”  C’mon, Mr. Speaker.  Can you go for one day without mentioning ObamaCare or the stimulus bill?  Do we really need to be politicking during a crisis like this?

Conclusion

I think that the Congress will work out a bipartisan bill that will get passed this week, and will send it to the president’s desk.  It seems that Congress can work pretty well together, and can come to a compromise, even if Congress can’t work with the president to get it done.  There will be two things that the president won’t like in the bill that comes to his desk:

  1. It won’t have tax increases (or closed tax loopholes).
  2. It won’t increase the debt ceiling enough to get us through the 2012 election, but will raise it enough to get us through our current crisis.

Not raising the debt ceiling enough to get us through the 2012 elections is not good news for President Obama, because it makes government spending a central issue of the election, which is not a good topic for the president.

My guess is that President Obama will acquiesce to the will of Congress, and will sign a shorter-term bill than he would like, and will use it to show that he can compromise.  However, a short-term debt limit increase will set us on a path to where the president can demonstrate to Congress that he can cut spending, which is something I would be worried about if I were a member of Congress.  I wrote about this last week… the Republicans don’t trust Democrats to actually implement spending cuts.  If, over the next six months, the president can demonstrate that he can implement spending cuts, then the Republicans will be more open to revenue increases when the debt limit debate comes up again in six months.

Questions: What are your thoughts about the debt speeches last night?  Are you satisfied with any of the deals on the table in Congress now?  You can leave your comments by clicking here.

  • http://pulse.yahoo.com/_KBY52OYW6XWECTCG3BUNJW6BU4 Broc

    Fist off I would recommend watching the two speeches via the internet to not only get the words that were spoken but also the “unspoken” communication and tone presented by both President Obama and Speaker Boehner, considering how much of communication is unspoken this is an important part to observe.  Speaker Boehner came across just as House Republicans have come across during this entire debate, ideological not practical and unwilling to compromise. 
     
    To your complaint about blaming Bush…considering we are still picking up the pieces of our broken economy which President BUSH’s terms got us…yes President Obama can still reference President Bush to remind people of where we are coming from in 2008 to where we are now. 
     
    “…It won’t increase the debt ceiling enough to get us through the 2012 election, but will raise it enough to get us through our current crisis…”
    The credit rating agencies have already signaled that if Congress does pass a short term deal which does not have serious deficit solutions they will still down grade America’s credit rating.  Which means if Speaker Boehner’s plan is put through America could still be down graded.  This is why President Obama is going after the “grand bargain”. In addition to this fact President Obama is also correct in saying this negotiation will not be any easier 6 months from now when it is closer to election time.  It will only have more partisanship and more entrenched sides.  President Obama does not want, even the chance, of America’s credit being down graded.  House Republicans seem to be willing to put further stress on America’s economy as long as President Obama does get what they view to be, any “WIN” on this debt crisis. 
     
    “…The Balanced Approach = serious, historic spending cuts + tax increases for the “wealthiest Americans” + tax increases for the “biggest corporations” + “raise the debt ceiling…”

    Spending cuts, entitlement reform, increase revenue, raised debt ceiling…why do you see this as “bad”
     
    The “grand bargain” should be the only deal on the table… these other smaller deals do not signal to the world, or America’s creditors that we are able to put politics aside to govern responsibly.  I have said over and over but I will say it again. In divided government such as we have now, with a Republican controlled House and a Democrat controlled Senate and White House, the ONLY WAY TO LEGISLATE IS COMPROMISE.  House Republicans have been unwilling to compromise to this point and from Speaker Boehner’s address they seem to care more about a pledge they gave to Grover Norquist than serving the American people. If one of these small deals are passed and America STILL gets its credit down graded, which is a real possibility, our economy will be adversely affected and this damage will be solely self-inflected.  House “Tea Party” Republicans and some Republican Presidential candidates have pushed our nation to this point with irresponsible and reckless rhetoric minimizing the effect that this crisis will have on our economy.  Interest rates will go up on student loans, car loans, home loans, credit cards, and stock markets will react unpredictably.  Business will not have certainty which we both know is a bad for the economy and job growth.  The time for games is over, the time for politics is over, it is time to do what good and right for our country and get a real deal done.  As much as House Republicans want to control all of this process they have to understand that they control 1/3 of the process, they NEED TO COMPROMISE.   
     

    • http://bobewoldt.com Robert Ewoldt

      That “bad” part of his description of the two approaches was the one is
      “balanced” and one is “Grandma and middle-class killing.” The rhetoric was
      bad.

      He used the word “balanced” many times to support his side of the
      negotiations, while denigrating the opposing viewpoint, while many people
      see the other side as “balanced” as well–a balance between spending
      decreases and debt level increases. He’s been unable to compromise, because
      he’s unwilling to see that any plan that he puts forward with tax increases
      is untenable.

      He talks about how OTHER politicians are unable to compromise, while he’s
      the one who cannot give up his tax increases.

      The truth is that 2/3 of the process HAS been compromising. The House
      (Republicans) and the Senate (Democrats) have been working together to get a
      deal put together, while the president has only been doing press conferences
      complaining about how the other people involved won’t compromise by raising
      taxes.

      • http://pulse.yahoo.com/_KBY52OYW6XWECTCG3BUNJW6BU4 Broc

        I agree that President Obama’s description of the two plans was partisan and not constructive to the process at all. However, President Obama did give credit to Speaker Boehner for his own (not his House Republican member) ability to compromise, when we they were close to a “big deal”. 
         
        He used the word “balanced” because it is actually true that his approach is balanced a crossed the political spectrum while Republicans want to frame the argument that just raising the debt ceiling is compromise for them.  Raising the debt ceiling is NOT compromise since it is REQUIRED to avoid economic disaster.  Compromise within the Republican Party between moderates and Tea Partiers is not compromise with Democrats and its not compromise with Senate members or the White House.  So while the President is talking about a balanced approach from everyone, Republicans seem to have no interest in compromise just their own political ideas.     
         
        Really you want to say House Republicans have been compromising…really…on what exactly.  Who has moved to middle and who has not?  President Obama has moved to middle on the amount of spending cuts and entitlement reform, what exactly have Republicans been willing to give on? Your “truth “about compromise is a complete lie.    We are lucky that Democrats are more reasonable than Republicans because if they were as locked into their positions as the House Republicans nothing would be done at all.  Anyone who would say that House Republicans have been the ones compromising in this situation has either not been following the debate or blinded by partisanship themselves.   

  • http://www.facebook.com/cmoney442 Corey Lord

    I think the thing that the GOP isn’t realizing with their two-step plan is that we will almost definitely take a bond rating downgrade since we are just kicking the can down the road but not far enough down the road to provide any confidence in our bonds.  Yes, the president’s plan will allow for the debt limit to be raised and not reached until after 2012 which seems like a political move.  However, investors are acting differently.  Investors want confidence which a longer term deal will provide.

    Furthermore, the American public agrees with the president that tax revenue increases are necessary for us to get out of this fiscal crisis.  Additionally, the bond agencies would like to see it too since it will provide more certainty for our future than just spending cuts.  

    My conclusion is that the GOP is too ideological to make any good plans.  They have no evidence that raising taxes on the rich will destroy our economy.  Heck, even in theory, raising taxes on the wealthy won’t be as catastrophic as the GOP claims.  I place the blame on the current GOP leadership if we get a bond downgrade.  Honestly, I’m not worried about default, I’m more worried about the bond downgrade.

    • http://pulse.yahoo.com/_KBY52OYW6XWECTCG3BUNJW6BU4 Broc

      Corey, I do not think you can say that the GOP doesn’t realize the danger here, because reports from DC have said Republicans have met with top experts and our credit rating agencies, they have been told what the consequences will be. However whether they believe those experts or whether like Rand Paul believe, somehow, that default will be good for our country that is another story.
       
      Here is the link for the GOP’s meeting with credit agency: http://www.politico.com/news/stories/0711/59612.html  

      • http://www.facebook.com/cmoney442 Corey Lord

        That article is talking about the risk of default.  They didn’t talk about bond rating downgrade even if a deal is reached by the default deadline.  That is the reality this week.  Since no positive progress is being made and no good long-term plans are being discussed we’re at over a 50% chance of downgrade.  

        Here’s a good WSJ article discussing the problems with downgrade and how current debt deals aren’t giving any confidence to the bond rating agencies: http://online.wsj.com/article/SB10001424053111903999904576468553582790160.html?mod=WSJ_hp_LEFTTopStories

        • http://pulse.yahoo.com/_KBY52OYW6XWECTCG3BUNJW6BU4 Broc
        • http://bobewoldt.com Robert Ewoldt

          The U.S. has already been downgraded by some credit rating agencies, not
          because of this debt limit debate, but because we’re spending at an
          unsustainable level, and because we cannot continue to borrow money at the
          rate at which we’re currently borrowing.

          Corey, I don’t know if you read mine and Broc’s comments on an earlier post
          about the Balanced Budget Amendment (BBA). It seems like we can agree that
          a BBA is necessary, and I would say that I could live with Broc’s proposal
          in one of his final comments: a balanced budget requirement, simple majority
          required to raise and lower taxes, and a cap of spending somewhere between
          18% and 22% of GDP (I’m closer to 18-19, Broc’s closer to 22%, but I think
          we could meet somewhere in the middle).

          Would you support a balanced budget amendment? If not, why not? If so,
          what would your requirements be?

          • http://www.facebook.com/cmoney442 Corey Lord

            I would only support a BBA if defense spending is main item on the table.  Also, we need to reform our tax code, including raising tax rates on high income earners and removing certain deductions that people use solely to reduce their taxes (i.e. deductions for mortgage interest motivates people to keep their mortgage debt).

            You are right, Bob, any downgrade (didn’t know it happened already) is because of unsustainable spending.  Remember though, its only unsustainable due to our revenues (i.e. if we had roughly $1.5 more in revenues the spending wouldn’t be as much of an issue).  So I definitely support a more balanced approach to fixing our budget issues.  Remember before 2001, the wealthy had higher tax rates all through the boom years of the 90’s, so to say that increasing taxes on the wealthy will ruin our economy is just plain wrong.

          • http://bobewoldt.com Robert Ewoldt

            I would also support reforming our tax code.  However, I don’t believe we would get much more money from high income earners. 

            In the last 100 years…In the 15 years in which we had the highest top marginal tax rates (most years between 1944-1961… all of these years had a highest marginal tax rate above 81%), the average revenue brought in by the government was 18.87% of GDP.

            In the years where we had a top marginal tax rate of between 60% and 80%, we brought in an average of 12.79% of GDP in revenue.

            In the years where we had a top marginal tax rate of between 28% and 35%, we brought in an average of 16.8% of GDP in revenue.  And between 36% and 59%, we brought in an average of 16.23% of GDP.

            So, what we see is that when we have high marginal tax rates, this doesn’t correspond to drastically higher revenue.  In fact, in the last 50 years, we haven’t brought in revenue above 20.35%, and the average has been 17.52% of GDP.  So, if we make a balanced budget amendment that says that we can balance our budget at 20% of GDP, it’s going to be a stretch to ACTUALLY bring in that much money, no matter what tax rates we use.  This is because taxes affect behavior, and if we raise taxes, people will adjust their behaviors accordingly.

            Raising taxes on the wealthy isn’t going to solve the problem.  I don’t think it will really even make a big dent in our deficit (it may make a small dent, but I think it would have greater adverse economic effects than the good that it would do).

          • http://pulse.yahoo.com/_KBY52OYW6XWECTCG3BUNJW6BU4 Broc

            Both sides say they want to reform the tax code but for very different goals.  Democrats want to increase revenue which could be used to offset deficit or limit the amount of spending cuts required. Republicans have no interested in increasing revenue not because they do not care about the deficit but because their goal is to shrink government.  They believe if they can cut off the revenue that government will be forced to cut programs and make government smaller. 

            While your math on the tax rates and percent of GDP may be accurate to the times it is not in context all with current circumstances. In the last 100 years and in the time frames you laid out 1944-1961 (before Regan “voodoo” economics) the dichotomy between wealthy/average/poor Americans was much less.  There was much more equality in the earnings of Americans, of course there were rich, average and poor Americans but nothing like what we have today. America has never been so top heavy, more wealth has never been so concentrated at the top in the history of our country. I am sure you have heard the saying… The top 400 wealthiest Americans have more wealth than the bottom 60% COMBINED. That’s about 187,099,800 people.  It would stand to reason that if we need more revenue that we would go the ones that have the most of it, not the people who have seen their median wages stay stagnant or go down over the last 10 years.
            Bob,  I have heard you rail on and on about how taxes affect behavior and how “job creators” will produce less if we raise taxes, but let me ask you; If so-called “job creators” aren’t creating jobs shouldn’t they lose the title of “job creator”.  The bush tax cuts have been in place for over 10 years to “minimal” success at best.  Lets face it, in spite of very profitable years in 2010 and 2011 business are not hiring. The profits are there and lots of money is being made by American business but they simply are not hiring.  Why call them “job creators” if they don’t create jobs?

          • http://pulse.yahoo.com/_KBY52OYW6XWECTCG3BUNJW6BU4 Broc

            Also an exception for diaster relief spending. 

          • http://www.facebook.com/cmoney442 Corey Lord

            Do you mean that disaster relief spending is allowed to put the budget into deficit?  I can agree with that.  BTW I didn’t mean defense spending being an exception, I meant that it needs to be cut drastically (I hope that was clear).

          • http://pulse.yahoo.com/_KBY52OYW6XWECTCG3BUNJW6BU4 Broc

            Yes, in any BBA that I would support disaster relief funds for domestic emergencies (BP oil spill, wild fire, tornadoes, etc) or global emergency (Tsunami Japan etc.) would not count against the budget we could spend money in deficit for that. Current BBA only allows exceptions for war. 

          • http://bobewoldt.com Robert Ewoldt

            Correction, the current BBA does NOT have an exception for war. The
            exception that you’re talking about is part of the Cut, Cap and Balance bill
            that was passed by the House, but not in the BBA section of the bill. The
            bill doesn’t specify exactly what the BBA will be.

          • http://bobewoldt.com Robert Ewoldt

            I would be OK with an exception for disaster relief spending.

            In terms of defense spending, it would definitely NOT be exempt from the balanced budget amendment.  It would have to be controlled.  I’m not one of those people that thinks that we have to have a bloated defense budget; there’s probably a good chuck that we could cut.

    • http://pulse.yahoo.com/_KBY52OYW6XWECTCG3BUNJW6BU4 Broc