The Broader Market

by Jordan Eizenga

The White House-Congress debt limit negotiations are getting down to the wire and the consequences of failing to reach an agreement in time to raise the debt limit by August 2nd are dire. Given these facts, you might ask, “Why can’t the White House and Republican leaders in Congress get their act together and come to an agreement?” Well, let me set the record straight and illustrate where the problem really lies.

At the end of spring, Republicans made clear that they would not raise the debt limit without measures to reduce the deficit. Democratic leaders resisted at first, claiming that high unemployment and weak job growth would be exacerbated by reducing the deficit right away. As a matter of policy, the Democrats were right to object. But, they ultimately relented as it became clear that their Republican counterparts were not going to back down from their position.

This, in turn, led to negotiations between Democrats and Republicans about how to reduce the deficit. Republicans wanted a deficit reduction package comprised of large spending cuts. Democrats acquiesced, but asked that some part of the deficit reduction come in the form of increases in tax revenue. To be specific, the White House proposed that less than 20 percent of deficit reduction come in the form of tax revenue increases through the elimination of tax loopholes. 

But, for House Republicans, particularly Republican Congressman Eric Cantor, any increase in tax revenue would be a non-starter. No matter what amount of deficit reduction, any increase in tax revenue would be unacceptable.The Republicans were never really willing to negotiate.

As New York Times columnist, David Brooks, wrote of the Republican Party last week:

“The members of this movement do not accept the logic of compromise, no matter how sweet the terms. If you ask them to raise taxes by an inch in order to cut government by a foot, they will say no. If you ask them to raise taxes by an inch to cut government by a yard, they will still say no….”

Given the calamity that will ensue if Congress does not raise the debt limit, the intransigence of House Republicans and their unwillingness to negotiate in good faith is simply unethical.