The Coming Apocalypse

As we all know by now, the United States government will default on its debts if it does not raise the debt ceiling soon -- by early this summer at the latest. By some accounts, such a default is unimaginable because the resultant economic catastrophe is so obviously forseeable that not even the House of Representatives could allow it to happen. Let's hope that wisdom holds true.

Of course, the more difficult question is how we reduce the necessity of having to go through this exercise repeatedly. Right now the government spends far more than it brings in, for several reasons. Some day soon, we -- and I mean "we," not just the people we elect to Congress and the White House, because it will be our money and our lives that will be affected -- will have to decise how to balance this equation. It will require compromise and probably some level of sacrfice that we have not made in too long.

The TEA Party likes to talk about the spending part of that equation. As Mark Meckler and Jenny Beth Martin wrote in Politico this week,

"The real medicine needed is to do what Congress originally intended a debt ceiling to do: stop borrowing. Every poll shows the majority of the public is against raising the debt ceiling. In poll after poll, between 60 percent and 70 percent of voters are against an increase. This despite constant wailing from politicians and bureaucrats that failure to raise the ceiling would lead to economic catastrophe.... Refusing to raise the debt limit is likely to force the politicians to deal with entitlement reform and spending cuts today — not after the 2012 elections, when it might be too late."

As far as they can see, borrowing is a moral as well as an economic issue, and sometimes moraility needs to take precedence. They don't like "entitlement" and they don't like debt.

I don't agree about the morality of the "entitlement" programs they hate. I think government has an obligation to its citizens that extend to offering some protection when they are least vulnerable. Such philosophical questions will never be fully resolved are the main stuff of political debate.

On the economic question, though, the answer is a little easier. As Robert Samuelson argued in Newsweek last month, the other side of the equation must be considered, too. That is, we do have to raise taxes while we cut spending. More particularly, we have to increase taxes on the wealthy individuals who benefit so much from the enormous profits of multinational corporations. TEA Partiers might be right about the suppressing effect of taxes on corporations -- and Samuelson argues that corportae tax rates ought to be cut and then enforced -- but

We should lower the tax on corporations. That would make the United States more attractive to U.S. and foreign multinationals. We should then raise taxes on the people who receive the benefits of corporate profits. The economists suggest cutting the corporate rate to 26 percent and increasing the capital-gains rate to 28 percent; dividends would be taxed as ordinary income. If done properly, this switch would create jobs, lower tax avoidance, and cut budget deficits. Eliminating unwarranted business tax breaks could raise extra revenues.

I have no idea whether these specific changes would have the effect Samuelson says they will, though it sounds right to me. Whether you agree with Meckler and Martin or not about the morality of providing the poor with enough food to eat, though, it can't rationally be denied that the government must collect taxes to reduce the deficit. we can't -- we won't -- reduce spending to zero.

And that means that the threats to prevent the raising of the debt ceiling are both hollow and myopic. What threats can the TEA Party people make, what concessions can they extract, that would be worth a meltdown? It's time to find a reasonable compromise.