March 1, 2011

Washington Scene: If it’s Broke, Then Fix it

By Warren Belmar

As difficult as it is to fathom, the 2012 presidential and congressional election races, which are a year and a half away, are already in full swing in Washington. This does not bode well for finding compromise solutions to pressing fiscal, foreign policy, and social issues facing Congress and the Obama administration. Indeed, in recent years elections have polarized both the Republican and Democratic parties into positions that make it more difficult for centrist members in each party to work together.

As I write this column, the Con- gress, which is presently enjoying its Easter Recess, is faced with the choice of raising or not raising the national debt above its current limit of more than $14 trillion. Unless Congress is able to craft a solution grudging acceptable to a majority of the public, Standard & Poor’s Financial Services forecasts that we will face a material risk to the US AAA credit rating.

Regrettably, the Obama administration and the leadership in the House and Senate appear to be captives of the more outspoken elements of their respective constituencies. As a result, they have chosen not to endorse the recommendations of President Obama’s bipartisan National Commission on Fiscal Responsibility and Reform, which suggest specific spending cuts and tax simplification as solutions.

Without an acceptable compromise proposal, all sides are looking to the so-called Gang of Six: three Democratic senators, Kent Conrad of North Dakota, Richard J. Durbin of Illinois, and Mark R. Warner of Virginia; and three Republican senators, Saxby Chambliss of Georgia, Tom Coburn of Oklahoma, and Michael D. Crapo of Idaho.

It has fallen to them to take the political heat and craft a legislative proposal that would raise the debt ceiling while making significant structural changes to future federal budgets. As these senators represent all elements of their respective parties, one would hope that a solution acceptable to them would command enough reluctant support in the Congress and Obama administration to allow for a legislative solution that avoids a federal default on our national debt and other fiscal obligations while providing a path for curtailing our current budgetary deficits.

As Standard & Poor’s has warned, the time for kicking the can down the road has ended. We all must urge our elected officials to stop focusing on running for office and instead do the difficult jobs they have already been elected to perform. The danger is too great to expose our economy to the need for last-minute heroics necessitating pulling a rabbit out of a hat as the clock strikes midnight. Without timely compromise solutions addressing the debt ceiling and 2012 budget issues, the United States will indeed eventually lose its AAA credit rating, with consequences far more calamitous to the public and our economy than the failures of AIG and Bear Stearns, and the bankruptcies of General Motors, Chrysler, and Lehman Brothers.