As I write this column on Monday morning, Greece is being bailed out once again by its European neighbors. Italy is on the brink. Global markets are volatile and jittery. And our nation faces a fiscal challenge of enormous proportions. That's the bad news. The good news is that America is blessed and exceptional, and I still believe we have the fortitude and political capacity to meet this unprecedented challenge.
First and foremost, we must deal with the plain truth: Defaulting on America's obligations -- to our creditors, seniors, disabled veterans, active military personnel, college students and many others -- is not an option. Second, a ratings downgrade of the US government must be prevented.
Stopping a default will occur by simply raising the debt ceiling; preventing a ratings downgrade is a much more demanding, painful exercise that will impact us all. Only a sound, credible plan that places America on a sustainable fiscal trajectory will prevent the downgrade Standard & Poors warned of a few months ago and has recently foreshadowed. And just what does a downgrade mean? Higher interest rates for everyone. Interest rates for mortgages, small business financing, car loans, credit cards and yes, the federal government’s debt service payments will increase dramatically, which in turn will dig us into an even deeper hole.
I have spent an enormous amount of time working and meeting with financial experts, ratings agencies, Republicans of all ideological stripes, Gang of Six Senators, and Blue Dog Democrats to find an acceptable resolution.
Based on these discussions, it is clear that a resolution with broad bipartisan support and deep commitment is essential to restoring market confidence, and those same markets will respond much better to a Congressional act of commission rather than an act of omission. Prioritizing our debt obligations, attractive as it may sound, will be extremely disruptive and add more uncertainty to an already fragile situation. If you don't believe me, please read the Bipartisan Policy Center's sobering debt limit/cash flow analysis for the federal government beginning August 3.
So what should be done?
First, the White House needs to offer a serious, specific plan. No more back-of-the-envelope suggestions, leaked from closed door meetings. As the nonpartisan CBO Director Doug Elmendorf stated in a stinging rebuke of the President, "we don't estimate speeches." Carping about the House passed budget and the "Cut, Cap and Balance" legislation because it cuts spending is not a substitute for leadership.
To the Senate, do something. Anything. How about passing a bill? Under Senate Majority Leader Harry Reid, it has been a staggering 800 days since a budget was passed in the chamber. Congress can't clap with one hand. In spite of Senator Reid, the Gang of Six has made an important contribution to the fiscal reform discussion.
To some of my more frustrated Republican colleagues in the House, for the good of the American people, I ask that you remain open to potential solutions beyond Cut, Cap and Balance. And please, focus less on what you will never do and more on what we must do. We have a sacred duty and solemn obligation to lead and act. We have an affirmative obligation to govern for the sake of our country.
The hourglass is nearly empty.
Let’s review the options: 1) Cut, Cap and Balance; 2) a short-term plan based on agreed to spending cuts in recent negotiations; 3) the so-called "Grand Bargain"; or 4) the last ditch plan offered by Senator McConnell.
Or how about an intermediate approach like this: Immediate spending cuts that exceed the amount needed to raise the debt ceiling through January, a binding commitment to: 1) enact comprehensive tax reform that eliminates tax breaks and loopholes in exchange for lower marginal rates that will spur economic growth and create jobs; 2) long term spending reforms, including caps; and 3) budget enforcement mechanisms.
If nothing else, we must bring the process into the open to restore confidence. The American people demand leadership and constructive action. The world is watching. It's time to lead and demonstrate our American exceptionalism.
-Congressman Charlie Dent