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Can anyone give a brief summary of this whole political drama. I have been quite detached from it, and it would be nice to have enough info to develop a quick point of view. Any takers? Thanks!
Posts: 468 | Registered: Mar 2008
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quote:Originally posted by RivalOfTheRose: Can anyone give a brief summary of this whole political drama. I have been quite detached from it, and it would be nice to have enough info to develop a quick point of view. Any takers? Thanks!
Here is my mostly non-partisan explanation.
In the early 19th century it was decided that congress should have the authority to place a limit in the amount of debt in real dollars that the US can have at any one time. Due to inflation and population booms, as well as a growing military and government, the congress has authorized a rise in this debt ceiling about 90 times since 1930.
Typically, the party not in power votes against a rising debt ceiling to protest the nature of spending by the party in power, but typically this is symbolic, and done with the understanding that the measure must pass. If it were not to pass, and the US were to default b it's loan payments, then international credit rating agencies nights decide to "downgrade" the us debt, and make it so that in order to borrow in the future, the US would have to pay higher interest. Higher interest means borrowing is more expensive, and so economic expansion would be slowed, due to less borrowing and less profit from borrowing.
Normally debt is neither a good or bad thing. Debt at a good rate, such as the US has, can allow the US to spend money n economic expansion today, and make enough money now that the cost of the debt is less than the gains made on expansion.
However, over the last 10 years, the US has borrowed a great deal of money with no plans to pay that money back. This money was spent mainly n defense, and the two wars in Iraq and Afghanistan. At the same time, taxes have been cut. The hope was, although based on unsound theories, that the added income to the wealthy would stimulate economic growth more than government spending would. This did not happen. Instead, economic growth continued largely as a factor of increased consumer credit. As the real value of wages for working and middle class families went down against inflation, consumer debt rose steadily. This was partly a factor of overal US debt. As the nation borrowed and spent money, the debt market in the US attracted investors looking for a safe financial bet. Consumer credit became cheap, and banks looked for ways of increasing consumer debt in order to utilize the increased investment from overseas.
The situation came to a head in 2008. The real value of consumer credit in the US began to crash. Money that had been invested in housing speculation and a housing bubble, based on the overvaluation of housing n the us because of higher consumer debt, and thus higher and higher mortgage loans at low rates of interest, was lost. Employment, particularly lower wage and middle income employment, fell. The value of housing fell. Thus, as employment slowed, economic growth from consumer spending and credit began to contract, and the economy shrank. At the same time, taxable income and government revenues decreased, as spending and income shrank.
There was a contingent of conservatives in the country who blamed the occurrence of this recession on the size of government. They believed that taxes and government interference in private business had caused the economic slowdown. In reality, the greater causes of instability n the US economy were due to ineffective and insubstantial governme pnt regulation ofnthe financial industry, and also of the medical industry, particularly the insurance market, which accounted in those years for close to one fifth of US economic activity, when in most industrialized nations, health accounts for less than 8% of spending. The increased spending in healthcare, due to poor regulation, had led to massive wealth condensation. The healthcare industry had profited far more than was strictly to be expected, based n the services provided. At the same time, low tax rates on wealthier people and companies ensured that the federal government did not profit from this increase in wealth, and so it was further weakened against private industry, which lobbied successfully to maintain itself, despite inflicting demonstrable ecoomic harm, particulary to the middle class.
The idea that government spending and taxes were to blame for economic woes was fostered by "astroturfing" by private industries and conservative media outlets. They spent money and resources convincing average people that the government was to blame for the economic downturn, and also portrayed this school of thought as being "traditional" "common sense" and ultimately, morally true. The formation of the tea party was due to popular adoption of these ideas, and so in 2010, a cadre of conservative anti-tax anti-government congressmen were elected. They displaced moderate and experienced conservatives. This was partly catalyzed by the democratic attempt to place heavier regulation on the health care industry, with the am f socializing the system, to bring it into line with modern systems in other western nations, which are much more successful in providing the public with adequate and stable care.
This cadre of tea partiers vowed to not raise taxes, and to lower government spending. They recognized that their biggest opportunity was the debt limit. If they threatened not to raise it, they could extract huge concessions from the democratic senate and president. However, the republican leadership had a crisis. The house speaker, an establishment republican, was unable to convince these radicals that the concessions offered by the president were as favorable as they could possibly be. They refused to accept a deal wherein taxes would rise, and spending would be lowered substantially over ten years. Instead, they wanted a constitutional amendment, wherein the government would be forced t adopt a balanced budget, an impossible proposal, with n hope of ratification in the states. So theybrejected the deal, and n the eave of the debt ceiling expiration, the senate rejected their proposal as well, and replaced it with their own short term solution. The hope of a long term solution was lost, mainly because republicans hoped to use this political tactic nce more, but closer to the next presidential election, and the democrats wanted to forgoe that possibility with a lnger deal.
What is left is likely a poor compromise. The debt limit will be raised, but in the short term. A commission will be appointed to recommend future cuts, and if that commission fails, the the congress will have to consider a constitutional amendment, which has n hope of passing, and no hope of ratification.
Posts: 9912 | Registered: Nov 2005
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quote:Originally posted by RivalOfTheRose: Can anyone give a brief summary of this whole political drama. I have been quite detached from it, and it would be nice to have enough info to develop a quick point of view. Any takers? Thanks!
posted
That's because we all have an idyllic image of how politics should be and how back in the "good ole days" it was done right. Of course the West Wing is just an awesome TV show, but you get the idea.
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