Dr. Boyce: Why We Will All Lose In The Obama Debt Ceiling Debate

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In early 2001, America’s economic future was rosy: Our government was sitting on a massive budget surplus, and the Congressional Budget Office predicted that the next 10 years would carry our nation down the path of seemingly endless prosperity. This was a good time for President George W. Bush to push through a set of massive tax cuts, significantly reducing government revenue at a time when we didn’t quite seem to need the money.

On June 7, 2001, President George W. Bush signed the Economic Growth and Tax Relief Reconciliation Act of 2001. Little did he know, America would be under attack just a couple of months later, with our leaders choosing to finance two incredibly expensive and misleading wars with money we did not have. We also found out that ending a war is far more difficult than starting one, as our nation fell into the same psychological trap as the professional athlete who thinks that his money will last forever.

Making matters worse, much of the wealth we thought we had was a fabrication. America’s financial meltdown in late 2007 represented a massive market correction, where trillions of dollars seemed to disappear all at once. The problem is that much of this wealth didn’t exist in the first place. The value of a financial asset in an uncertain economic environment can be somewhat arbitrary, and market participants were viewing their wealth with blurred vision and faulty information about the present and the future. So, the prosperity we thought we’d obtained throughout the decade actually never happened – there probably would never have been a crisis if we hadn’t been lying to ourselves in the first place.

So, after two massive wars and a financial meltdown of historic proportions, we chose to put our hope in America’s first Black president. Like the Black coach given control of a football team that simply cannot win, President Barack Obama was given the incredible task of lifting our nation out of a recession with diminished government resources. Many of these resources had been diminished by the Bush tax cuts several years earlier, and now lie snug in the pockets of America’s wealthy. This left Obama and his cabinet with one option: to borrow the money we needed and incur daunting budget deficits in order to fulfill campaign promises. It also didn’t help that the Obama Administration gave nearly all of this money to the same Wall Street bankers who caused the crisis in the first place.

As it stands today, our nation is now reaching its debt ceiling, putting us in danger of doing the unthinkable: defaulting on our financial obligations. As a graduate student working on my PhD, I was taught that the US government debt is entirely risk-free, with zero probability that the American government would not be able to pay its bills. All other debt is measured against the power of the United States Treasury Bill, but our enemies now smell blood in the water.

Republicans are wrong to put this crisis on the back of Obama. They are even more incorrect to presume that Social Security and Medicaid recipients are responsible for the problem. Many of these Americans are already squeaking by, and it is beyond disgraceful to somehow think that funds should be taken from the most vulnerable.

What is even more sad is that the sloppy choices of the Republican party are a depressing reflection of what our nation has become: a place where greed is good, where the rich get richer, and where the financial destruction of our country is not nearly as important as protecting our personal quest for gluttonous economic choices. The Obama Administration is also complicit in our nation’s economic demise, for only a fool would give so much political power to the same Wall Street bankers who caused the crisis in the first place. I still laugh when I think about how Wall Street executives were the ones who caused the crisis, received the first bail out, and experienced the quickest economic recovery. Workers and the poor are barely on the radar screen as we play Russian Roulette with our collective future.

One only needs to rewind history and go back to the day when the Republicans decided that the rich should be excused from their obligation to pay their fair share in taxes. Had the Bush tax cuts never been implemented, President Obama’s deficits would have been cut in half and the debt ceiling would not have been reached this quickly. In this debate, the Republican Party is not in possession of the moral high ground, and their behavior will be pivotal in the pending decline of America on the world stage. But of course, one can only expect that they will continue to hammer away at the poor, since that’s what they were taught in Capitalism 101.

Dr. Boyce Watkins is a Finance Professor at Syracuse University and founder of theYour Black World Coalition.  To have Dr. Boyce commentary delivered to your email,please click here.

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