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On Debt Ceiling, GOP "Uncertainty" Talking Point Vanishes

May 16, 2011

For decades, Republicans have deployed the word "uncertainty" to block action on acid rain, global warming, reproductive rights, the teaching of evolution and just about any other public policy with which they disagreed. On no issue has the Republicans' regurgitation of the uncertainty talking point been more rapid than on taxes. But while GOP leaders Mitch McConnell and John Boehner in December demanded the immediate extension of the Bush tax cuts for the wealthy to "reduce the uncertainty that's affecting employers all across our country," they have had no such qualms about the urgent need to raise the $14.3 trillion U.S. debt ceiling reached today. Instead, the prospect of an American default and ensuing global financial catastrophe so feared by the U.S. Chamber of Commerce and other Republican business allies is what Boehner and McConnell now consider to be "a great opportunity."

That was the word from the Senate Minority Leader on Sunday, who described bringing the United States to the brink of an economic cataclysm this way:

"Rather than thinking of this as a crisis, I think of this as an opportunity to come together."

Speaker Boehner agreed, telling Bob Schieffer of CBS News on Sunday, inviting President Obama to "lock arms and we'll jump out of the boat together."
Of course, the Republican invitation to join arms with Obama is an only an opportunity for draconian spending cuts. As The Hill noted, "McConnell advocated for a hard two-year spending cap be included in any debt limit increase" in addition to his previous demands for steep cuts to Medicare, Medicaid and Social Security as well as a vote on a Balanced Budget Amendment to the Constitution. Despite having just voted for the Paul Ryan budget which would add $6 trillion in federal debt over the next decade, John Boehner demanded spending cuts at least as large as the increase in the debt ceiling. As Boehner trumpeted Sunday:

"Medicare, Medicaid - everything should be on the table, except raising taxes."

Why is new revenue from tax increases off the table for Republicans? Because, as Boehner explained to Wall Street executives last week, of "uncertainty":

"A tax hike would wreak havoc not only on our economy's ability to create private-sector jobs, but also on our ability to tackle the national debt. Balancing the budget requires spending cuts and economic growth. We won't have economic growth if we raise taxes and fail to address the drivers of our debt. The mere threat of tax hikes causes uncertainty for job creators -- uncertainty that results in less risk-taking and fewer jobs. If we're serious about balancing the budget and getting our economy back to creating jobs, tax hikes should be off the table."

Of course, the uncertainty myth about taxes has been debunked time and again by economists and history alike. Phil Gramm spoke for Republicans in both houses on Congress - all of whom voted against the 1993 bill that boosted the top rate to 39.6% - when he predicted:

"I believe hundreds of thousands of people are going to lose their jobs...I believe Bill Clinton will be one of those people."

Instead, under Clinton the U.S. produced the longest economic expansion on record and 23 million new jobs.
Republicans circled the wagons late last year to prevent a return to the upper-income tax rates of the booming 1990's, once again hiding behind "uncertainty." But as Michael Hiltzik wrote in the Los Angeles Times, "'uncertainty' isn't the real reason they're not hiring." Poor sales, and not the uncertainty over taxes cited by the likes of the U.S. Chamber of Commerce, are at the heart of the problem for small businesses. And as former head of the Obama Council of Economic Advisers Christina Romer put it in December:

Uncertainty is likely holding back the recovery. But its sources are far more fundamental than the tax and environmental issues that typically top the list of complaints. And the solution is certainly not for the government to do less. Rather, it needs to do much more.

Republicans proved her right with the two-year, $800 billion tax cut compromise they inked with President Obama in December. After all, that deal extends only through 2012, meaning the dreaded uncertainty will once again rear its ugly head as January 1, 2013 approaches. (Just to be on the safe side, Republican colleagues Jim Demint (R-SC) and Mike Pence (R-IN) proposed making the budget-busting, Treasury draining Bush tax cuts permanent. The name of their legislation? The "Tax Relief Certainty Act.")
But where uncertainty does pose real risks to the American economy is in the failure to raise the debt ceiling.
Republicans don't have to take Treasury Secretary Tim Geithner's word for it that default by the U.S. "would have a catastrophic economic impact that would be felt by every American." Their big business allies have been telling them the same thing for weeks. Among them, as the Wall Street Journal reported on Friday, is the U.S. Chamber of Commerce:

The U.S. Chamber of Commerce waded into the fight over increasing the government's borrowing limit on Friday by urging members of Congress to raise the debt ceiling "as expeditiously as possible."
The business community's chief lobby in Washington made the case in a letter to lawmakers signed by Bruce Josten, the group's head of government affairs, arguing that failure to pass legislation authorizing an increase in borrowing by Aug. 4 "would create uncertainty and fear, and threaten the credit rating of the United States."

That's the same message Wall Street has been communicating to Speaker Boehner, who under pressure from the GOP's Tea Party wing has joined the dangerous game of chicken. As Politico reported in April:

The Wall Street executives say even pushing close to the deadline -- or talking about it -- could have grave consequences in the marketplace.
"They don't seem to understand that you can't put everything back in the box. Once that fear of default is in the markets, it doesn't just go away. We'll be paying the price for years in higher rates," said one executive.
Another said that "anyone interested in 'testing' the debt ceiling should understand the U.S. debt traded wider [with a higher yield] than Greek debt roughly five years ago. Then go ask CBO what happens to our deficits/public debt to GDP, if the 10-year [Treasury bond] goes from 3.5 percent to 5.5 percent to 7.5 percent." The executive said such an increase would result in a downgrade of U.S. debt by ratings agencies and an end to the dollar as the standard global reserve currency.

As The Hill reported four weeks ago, the same business backers who bankrolled the GOP's overwhelming victories in November has had enough of the Republicans' fear, uncertainty and doubt:

The Obama administration will likely have the support of major business groups as it works to round up Republican votes for raising the federal debt ceiling.
Groups such as the National Association of Wholesaler-Distributors (NAW), the U.S. Chamber of Commerce and the National Association of Manufacturers (NAM) plan to step up their advocacy for a debt-limit increase as the deadline for congressional action draws closer.
Lobbyists for several major trade associations told The Hill that they have already had discussions with first-term House Republicans about the necessity of lifting the debt ceiling to avoid a default on U.S. debt.

With good reason. The specter of a global financial cataclysm caused by the default of the United States caused most sentient mammals to denounce that prospect as "insanity" (Obama economic adviser Austan Goolsbee), resulting in "severe harm" (McCain economic adviser Mark Zandi), "financial collapse and calamity throughout the world" (Senator Lindsey Graham) and "you can't not raise the debt ceiling" (House Budget Committee Chairman Paul Ryan). In January, even Speaker John Boehner acknowledged as much:

"That would be a financial disaster, not only for our country but for the worldwide economy. Remember, the American people on election day said, 'we want to cut spending and we want to create jobs.' And you can't create jobs if you default on the federal debt."

Despite their current posturing, John Boehner, Mitch McConnell and GOP Congressional majorities voted seven times to raise the debt ceiling under George W. Bush. During his tenure, the U.S. national debt doubled, fueled by the Bush tax cuts of 2001 and 2003, the Medicare prescription drug plan and the unfunded wars in Iraq and Afghanistan. McConnell and Boehner voted for all of it. But now that a Democrat is in the White House, the y proclaim that the debt ceiling vote is a "great opportunity" to reduce U.S. deficits.
Sadly, as suggested by recent polls which show Americans by over a two-to-one margin oppose raising the debt ceiling, the GOP is being rewarded for its intransigence and duplicity. As for the carnage their economic hostage-taking could produce, the Party That Cried Uncertainty has conveniently forgotten its favorite talking point.


About

Jon Perr
Jon Perr is a technology marketing consultant and product strategist who writes about American politics and public policy.

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