US Politics: Getting Serious on the Federal Debt?

The stakes involved in America's debate over the country's debt crisis were significantly raised last week. Senior lawmakers, and some of the figures involved with the President's deficit reduction commission, have decided that a passive role on the sidelines is no longer a winning strategy for forcing Congress and the White House to get serious about talks designed to solve the debt problem. In an appearance before the Senate Budget Committee on Tuesday, Alan Simpson --- one of the co-chairs of the commission --- warned that if the United States did not attempt to deal with the debt burden immediately then, sometime within the next two years, the nation would face its worse economic crisis in history.

Erskine Bowles, Simpson's co-chair, echoed his colleague's dire predictions; contending that if the debt problem continued to be ignored then a jittery market would look to offload American debt causing a financial catastrophe akin to the one engulfing Greece. Bowles also raised the point of how could America fund its obligation to aid Taiwan against any territorial move by China, when it would need to ask China for the money to pay for that longstanding obligation. Although Bowles did not explicitly link the statements, he was giving the context for the commission's oft-repeated use of the warning by the Chairman of the Joint Chiefs of Staff, Admiral Mike Mullen, that the greatest threat to America's national security is the debt crisis.

Following their Committee meeting, which The Hill headlined, "Debt commission chairmen rip GOP, Obama budget plans", Bowles and Simpson attended the launch of the Moment of Truth project. Here the "Gang of Six", the six Senators leading the charge for high-level talks on the fiscal crisis, signalled that the time has come for taking the offensive over the deficit. The day before, Senators Warner and Chambliss unveiled before a group of prominent businessmen in Virginia the presentation that will go on the road to explain the subject to the American public.

All this occurred against the backdrop of the Senate disagreeing over the timing, never mind the details, of votes on competing Republican and Democratic versions of bills designed to cut the deficit. But a consensus is growing in Washington that the current struggles over cuts in discretionary spending are a "phony debate", holding up consideration of much more important long-term structural changes to the American economy.

Of course, not everyone agrees that entitlement programs must be put on the negotiating table, particularly Social Security. This especially hard-hitting article by Richard Eskow, at the progressive Campaign for America's Future blog, lambasts the whole Bowles-Simpson agenda as an example of how: “A highly-financed network of consultants, ex-government officials, and politicians has been deployed to mislead the public on basic, unequivocal truths about Social Security, whose $2.6 trillion dollar trust fund could bankroll a lot of tax breaks for the wealthy. All it takes is a campaign to mislead and confuse the public.”

That point of view, however, does not alter the fact that Social Security will likely have to be included in the negotiations, if the Republicans are to take part. That subject is for a later article. Here it is enough to recognise that the drive for discussions over the national debt are becoming the main topic of conversation in Washington

Consider this number from Tuesday: the CBO revealed that America's deficit for the month of February alone was just over $220 billion. Compare that to the $57 billion Republicans want to cut from the federal budget for the remainder of this fiscal year, or the $5 billion Democratic counter proposal. Neither are remotely sufficient for addressing the deficit problem, while at the same time Republicans' clumsy attempts to drastically cut the spending side of the deficit equation are potentially only making the cost and benefit situation worse. Cutting funding for programs like the Institute of Peace, one of the key players in America's use of Smart Power abroad, will only cost the government more in the long run.

Former Senator Judd Gregg, once the ranking member of the Senate Budget Committee, became the latest big-name politico on Monday to acknowledge the long term fiscal crisis America must face. His remarks praised the Bowles-Simpson report as a “workable template” for reforming America's “chaotic” and “convoluted” tax code, and noted that while it was impossible to expect universal support for their plan, it included elements which both liberal and conservatives could get fully behind.

But that raises the question of what is involved in the reform of the tax code and how much of a dent it can make in the debt mountain. More on Tuesday....