Ben Bernanke had some words, Tuesday, for those GOP members of Congress who would hold up raising the nation’s debt limit in order to squeeze spending cuts into the federal budget. In a speech to the Committee for a Responsible Federal Budget, in Washington, DC, Tuesday, the Fed chief chastised those who would use the debt limit imperative “to force some necessary and difficult fiscal policy adjustments.” Saying that, though he “fully understand[s]” the desire to affect government spending, he insists:
“the debt limit is the wrong tool for that important job. Failing to raise the debt ceiling in a timely way, would be self-defeating if the objective is to chart a course toward a better fiscal situation for our nation.”
That would put the ball squarely in the court of the bipartisan, Congressional teams negotiating their way to an acceptable vote on the debt limit. Vice President Joe Biden said the group of six Senators and House members on his negotiating team are “going to be in a position hopefully that by the end of the month, by the Fourth of July recess, we have something to take to the leaders,” NBC reported.
The other group, the Senators known as the Gang of Six/Now Five, announced last week they are also close to a deal that they say will reduce the deficit by $4.7 trillion – more than any announced plan so far. According to a New York Times report:
“To achieve the savings, the Senate group is working on a framework that does not include raising tax rates. Instead, the approach would eliminate or reduce tax breaks to raise revenue and cut projected spending across the board, including on third-rail issues like entitlement benefit programs and military spending.”
One might think that eliminating and reducing tax breaks, by some GOP definitions, amounts to a tax increase. One who thinks that for sure is Grover Norquist, the anti-tax hawk, leader of Americans for Tax Reform, who has had Republicans, one-by-one, for more than a decade, sign a pledge not to vote for any tax increases.
Sen. Saxby Chambliss (R-GA), the Republican leader on the Gang of Six, showed his disdain for Norquist in a statement he gave Politico, Tuesday. “Grover Norquist has no credibility, so I don’t respond to him,” Chambliss said. “He doesn’t deserve being responded to.”
Sen. Tom Coburn (R-OK) seems to agree, at least if you go by a vote in the Senate, Tuesday. Coburn, who coincidentally left the Gang of Six a few weeks ago, sponsored legislation in the Senate that would have eliminated ethanol subsidies. Norquist wasn’t happy about that. “What he’s trying to do is trick some Republicans into voting for a tax increase so he can say to them, ‘Now join me in my support for working with Obama to raise taxes,’ ” he told NPR.
The measure failed, but 34 Republican Senators voted for ending the tax break for corn growers. According to the Huffington Post, Sen. Lamar Alexander (R-TN) explained his yea vote this way, “In my view, a good way to reduce the debt is to get rid of unwarranted tax breaks.”
But this loud rebuke of the man who has staked his political legacy on The Pledge, is not the victory it may seem. The Koch brothers’ KochPAC sent out word that they wanted the subsidies repealed, but not because they want to give taxpayers a break. They have heavy financial interests on the stuff we put ethanol in, and less ethanol means we have to use more gasoline.
Regardless, in this ultra-conservative spending environment, cutting tax breaks for industries is a welcome development. But raising the debt limit cannot be held up by Norquist or the Kochs or Congress, or, according to Bernanke, we’ll all be in trouble.
“I urge the Congress and the Administration to work in good faith to quickly develop and implement a credible plan to achieve long-term sustainability,” Bernanke told the CRFB. “I hope, though, that such a plan can be achieved in the near term without resorting to brinksmanship or actions that would cast doubt on the creditworthiness of the United States.”
If you wonder what might happen if our political circus continues to “cast doubt” on our credit, just look what happened to Greece. Today, Standard & Poors, convinced the Greeks will default on some, or all, of their loans, gave the country the lowest credit rating in the world.
- Grover Norquist Rebuked By GOP (huffingtonpost.com)
- Senate GOP-ers clash with Norquist (politico.com)
- For GOP, no room for tax talk (seattletimes.nwsource.com)
- Ben Bernanke: Deficit must be cut, but debt limit ‘the wrong tool’ (csmonitor.com)