THE WAY FORWARD ON OUR NATIONAL DEBT
The loss of the United States’ AAA credit rating – and the trillion-dollar market sell-off that resulted – would have been avoided if agreement had been reached on a “grand bargain” to reduce our deficits. President Obama’s Bipartisan Deficit Commission produced such a plan. At its heart was a compromise that reduced debt by $4T using a mixture of 75% spending cuts and 25% tax increases. A similar compromise by President Reagan relied on 75% Tax increases and 25% spending cuts.
Key to this compromise was the recognition that spending for economic stimulus was necessary to prevent the collapse of demand during the financial crisis, but that the debt from this spending must be paid back as the economy recovers.
This compromise approach was supported by the majority of Americans. So why did it not happen?
The short answer is that ideological anti-tax pledges signed by a majority of Republicans – including every member of the Illinois Republican delegation – meant they had pledged to refuse to negotiate or compromise. In a situation where the vast majority of our national debt is due to Republican policies, this will lead to disaster.