Monday, July 11, 2011

Debt Ceiling Madness

Negotiations over raising the United States's debt ceiling have reached a virtual standstill, as the Republicans remain intransigent over raising revenue. In particular, they oppose closing tax loopholes for rich people such as hedge fund managers. One major Tea Party leader, Sen. Jim DeMint of South Carolina, has expressed a willingness to cause major disruptions to the American economy rather than reach a compromise.

My Gut Reaction: Jim DeMint is not a real American. The Tea Party's stance as a patriotic force is a charade.

Analysis: It is time for Democrats to take a stand. Ideological fanatics like Senator DeMint and his followers are not loyal government officials. If they keep on their reckless course and America defaults on its debt, the consequences will include a massive drop in the United States credit rating, the inability to pay Social Security, and most disturbingly given the Republicans' stated concern for American soldiers, military payments.

What are the tax breaks that Republicans are trying to defend? Well, they include breaks for horse breeding and corporate jets, as well as the "carried interest loophole" for hedge fund managers. This carried interest loophole allows hedge fund managers to treat payments for their work as capital gains, resulting in their paying a far lower rate. If this loophole were ended, it could get the United States 4 billion a year, and cut the deficit by 44 billion dollars.

Even commentators who normally support the Republicans are crying foul on this. In a recent New York Times column, David Brooks argues that if the Republicans allow a default, they will show themselves unfit to govern, particularly in light of the Democrats' willingness to concede on government spending. Similarly, columnist George Will has said that it would be suicidal for Congressional Republicans to oppose raising the debt ceiling, even going so far as to question the proposition of the debt ceiling itself. (Video below)

Democrats must remain firm on the issue of tax loopholes. If the Republicans want to cut government spending, they must also be willing to give on tax loopholes.

No comments: