The definition of insanity, as the saying goes, is to do the same thing over and over but expect a different result. Yet that is exactly what the Republican party seems to be doing on the contentious issue of the federal debt ceiling. Even after two bruising fights over the issue, which the GOP wants to use as leverage to force spending cuts from the Democrats and which did great damage to the political credibility of both parties, House Speaker John Boehner is promising a repeat performance in the fall -- when theoretically the government will run out of money to fund itself.
This insanity really needs to stop.
The spirit behind the negotiation, namely achieving spending cuts in government, is absolutely fine. But despite the heated rhetoric, the fact is that our deficit this year will actually be lower than previously feared ($759 billion) and our economy is slowly but surely recovering from the recession that we were mired in for so long. These two facts alone reduce the urgency and the depth of the spending cuts required to move our nation towards better fiscal health, and render the tactic of holding America's debt ceiling hostage excessive and counterproductive.
There is also the matter of what the debt ceiling really represents.
Contrary to popular belief, it is not a blank check for the U.S. government to spend money but a mechanism to enable it to pay for things it has already purchased, and like anyone with a financial obligation, inability to pay would render the country insolvent, leading to instant and vast economic turmoil. In fact, it is not an overstatement that should the debt ceiling not be raised (as it has been dozens of times by both political parties for nearly a century), it would bring our economy to a grinding halt due to the massive financial interrelationships between the private sector and our government, not to mention with foreign nations. The U.S. government, for good or bad, is the premier creditor and debtor to the world, which means that it really cannot go bankrupt without dragging the planet down with it both in pure dollar terms as well as through a domino-effect economic meltdown.
America's economic health cannot be measured in budget deficits alone. Rising inequality, in both income and wealth, have the capacity to derail any recovery that is achieved. In addition, two-thirds of minimum wage workers and 28 percent of all workers get paid at levels far below what is required to rise above the federal poverty line. This stifling of opportunity for lower and middle income Americans is a serious impediment to our future productivity and actually increases the public's dependence on financial assistance from the government. Addressing it then should be a higher priority for our political leaders than the deficit.
If the Republicans really want to lower the government's expenses, they should start with helping to eradicate inequality, lean on corporations to pay better wages, close wasteful tax loopholes that benefit only the rich but do little to spur spending or the economy, and stop fixating on budget battles with Democrats. The debt ceiling is not a credible bargaining chip, and trying to use it as such shows desperation and bad faith on the part of the GOP.
President Obama was right to shut down debt ceiling talks the last time around and try to keep the focus on initiatives that will actually help improve the nation's economic health (and thus organically reduce the need for people's dependence on government) rather than cut spending recklessly at a time when it can do a lot of damage.
Taking a hacksaw to public services that make commerce possible in the first place, public education that will produce our next generation of workers, temporary financial relief for millions of unemployed Americans, social safety nets that enable underpaid workers to supplement their meager incomes and survive, small business sector lending, and many other vital components of our government, would narrow the deficit in the short-term but lead to an even bigger shortfall in the future when the harmful effects of such policies erode economic growth.
It is time for the Republicans to acknowledge the real problems confronting our nation, stop distracting the public with specious political gambits, and negotiate with their Democratic colleagues in better faith. Leaving the debt ceiling off the table this fall would be a good place to start.
SANJAY SANGHOEE is an active political and business commentator. He has worked at leading investment banks and hedge funds, has appeared on CNBC's 'Closing Bell' and HuffPost Live on business topics, and is the author of two thriller novels, including "Killing Wall Street". For more information, please visit www.sanghoee.com