Raising the debt ceiling became a crisis because Washington made it so. There were other ways around it for the president, including invoking the 14th Amendment, which states that "The validity of the public debt shall not be questioned" by a debt ceiling.
House Speaker John Boehner did a miserable job of corralling his own party. There are 435 members of the House of Representatives, and 241 are Republicans. Only 60 are tea party members, yet Boehner let these 60 extremists dictate the entire course of action on the debt limit. Without them he had 181 votes, compared to the 183 for the Democrats. He could have picked up a couple of Democrats and gotten the job done. It's hard to believe someone could be a worse speaker than Nancy Pelosi, but we have to admit she would have done a better job of leading and gotten the job done for the American public.
What we have now is a mixed bag no one is happy with. There is an increase of $900 billion in the debt limit and a cut, in two steps, of $917 billion in spending, unless Congress decides to repeal it. Then a special bipartisan committee is charged with finding additional cuts of up to $1.5 trillion for a vote this year. If Congress fails to pass those cuts by Dec. 23, automatic cuts will take place in military and domestic spending.
Everyone expected the stock market to bolt ahead 200 to 400 points on news of the debt deal. Instead, stocks have fallen for two days. The country's problems are far bigger than the debt ceiling, and Wall Street has to spend its own money, unlike Congress and the White House, which spend ours.
There are other issues that have surfaced but have not been resolved, creating more uncertainty. Two of the most prominent of those issues are an increase in taxes on the wealthy and a balanced budget amendment.
Having said the above, this country faces a far more critical problem in the economic maelstrom we are mired in. We may be slipping back into a serious recession. Growth in our economy is hovering around 1 percent, far less than is needed for a turnaround. There are officially 14 million unemployed in America, but as many as 10 million more jobless are not counted because they've given up looking for work. And while the economy falters, banks and corporations are sitting on trillions of dollars of cash.
But they won't invest it because they don't have any confidence in government finding a way out of the recession. Confidence is the key word. Without it no one, including the public, is going to go out and spend the kind of money necessary to turn the economy around and see businesses start hiring to fill the demand.
The important steps forward demand intelligence, good common sense and the art of timing.
Politicians have spent fortunes, a good deal of which could have been avoided. But the economy needs federal spending to continue to get factories working and people employed.
One would hope that Congress and the president understand that, have enough common sense to implement it and then know when the time is right for the spending faucets to be turned off.
Congress doesn't like to face up to distasteful problems. But there are two that cannot be ignored: Medicare and Social Security. By any standard of measurement, they cannot be sustained in their present forms in the coming decades.
They used to comprise 30 percent of the budget; they now comprise about half. Defense used to be 52 percent of the budget; it's now 20 percent. The problem is that if you attack Medicare, the elderly rise up in arms. Kathy Hochul learned how to exploit that and get elected to Congress. But we have to face the fact that people are living longer and health care costs are skyrocketing. Quite simply, and as much as we would like to take care of everyone, there's not enough tax money to cover that bill and still conduct the business of the government.
If the whole debt debacle wasn't already overwhelming, think about who is going to pay. Government spending has gone from 18 percent of gross domestic product in 2001 to 24 percent in 2011. In 1986, the top earners paid 43 percent of total tax revenue; today they pay 59 percent. In 1986, 18.5 percent of Americans paid no income taxes; today 51 percent of Americans pay no income taxes.
We could continue to pile the burden on the rich, and maybe that's OK, but we have to remember that the majority of Americans pay no income tax. What's left is not the percentage you want carrying the load. One would hope that everyone would pitch in to some extent.
Facing up to these problems is the job of our elected officials. It requires leadership, courage and statesmanship.
It's an awful lot to ask, considering their recent performance, and is a reason why the markets and the business communities have little reason to spend the money necessary to turn the economy around.