The most recent figures from the U.S. Treasury Department show that the country’s operating cash balance is $73.7bn. The BBC announced this morning that Apple’s operating cash balance is $76.4bn. That’s right, the company that makes our nifty iPods, Pads, and Macs; a company that was
listed on the 2011 Fortune 500 list as the 35th largest company in America, has a higher operating cash flow than our own country!
The logistics of the problems our country faces are staggering. President Obama said this morning that now is the time for both parties to unite and fix the current debt crisis. Unfortunately there is a little thing called reality, which includes a Republican run House (240 Republicans, 193 Democrats, and 2 vacant seats), a Democrat run Senate (51 Democrats, 47 Republicans, and 2 Independents), a House Speaker who refuses to bend to the will of the U.S. President, and a President who refuses to be taken to school by the Speaker of the House. That’s a lot of cooks in the kitchen guys. At this point we might be better off getting all the coupon-cutting, bargain-savvy, soccer moms of America to draft up a feasible plan.
The plans we’re working with now:
Speaker of the House John Boehner’s plan: Trim $917bn from the US budget deficit over 10 years and raise the debt limit by up to $900bn. This plan has gained new life after Boehner added a balanced budget amendment to the bill, which rounded up more Tea-Party votes, and after Obama announced this morning that we must reach a compromise NOW.
Senate Majority Leader Harry Reid’s plan (aka the Obama supported plan): Cut $2.2tn from the deficits, and raise the debt ceiling by $2.7tn into 2013. Yes, that’s TRILLION with a ‘T’.
What they have in common: Both trim spending over the next decade, both shun Obama’s call for higher taxes on the wealthy, and both plans would create special committees to draft future tax cuts.
Where they are going to butt heads like rams in mating season: Boehner’s plan would require another debt-limit battle royale during next year’s presidential election. This will happen over Obama’s dead body. Obama’s approval ratings have dropped to a new low of 40%, according to today’s Gallup pole, and debt-limit talks during an election year would unlikely help that number rise. Senate Majority leader Reid’s plan would raise the debt ceiling until the 2012 elections are safely behind the Democrats.
The Obama Administration’s possible options:
Option #1: Bend to the demands of the Republican party: Pshhh yeah right! This would mean no rise in taxes, tax cuts for the highest earners, bigger spending cuts, and appealing (at least partially) many healthcare reform bill items. If Obama is losing sleep now this option would have him living out his worst nightmare.
Option #2: Buy more time/Opt for a longer extension: This would mean taking the Republicans 6-8 month extension and running the deadline up against the presidential elections. Or they could request an extension of the debt ceiling. If the Republicans can agree on extending the raising of the debt ceiling past the 2012 presidential elections this could be the swiftest solution, and the most acceptable solution to both parties.
Option #3: Brinksmanship: We all keep hearing about this word in the news. By definition it means to pursue a dangerous policy to the limits of safety before stopping. Essentially, it means ignoring the debt ceiling altogether, prioritizing all payments, or cutting all payments by the government. This option is hell-a-scary to me for several reasons: First, the president could try to invoke the 14th amendment and ignore the debt ceiling. The 14th amendment section IV reads: “The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned.” Wow, that leaves a lot of room for interpretation, and many legal minds believe that Obama would be within his rights to invoke this power. Of course, if he tries, and his interpretations are wrong it could mean possible impeachment. Second, brinksmanship is horrifying because it could mean prioritizing payments, like social security, leaving our elderly out in the cold, and raising both legal and logistical issues. Third, this option could mean cutting ALL payments by the government, which would mean default by the U.S. government. Investor panic would most likely result, we would lose our AAA credit rating, and our recession status would be raised to beyond the point of economic crisis.
Throughout the decades presidential administrations have asked for, and been granted, a higher debt ceiling. Do you think it should happen again? And by how much should it increase this time? What do we need as a country? And it’s about time we start asking ourselves, what we can live without?
-Jacob Raehn (Law Student, Law Clerk, Concerned Citizen)