By Jay Kim
The top news in the United States early this month was the nation-straining threat of a government shutdown. The media coverage focused both on the possibility of a shutdown and its negative impact on the economy and the lower classes, which made the nation fear a possible repeat of the nightmare that surrounded the government shutdown during President Bill Clinton’s first term 16 years ago.
Fortunately, an agreement was reached at 11 p.m. on April 8, an hour before the imposed deadline, ending the threat of shutdown.
However, now the real fight begins ― the debates over the debt ceiling law, a law that prevents the limitless increase of government deficits. Since its passing in 1917, there have been many changes to the debt limit. It is law that the maximum limit of the government’s debt cannot be raised without consent from Congress.
The current debt ceiling is $14.3 trillion, which will be reached in the middle of next month, with the debt already at close to $14 trillion. Without raising the debt ceiling, the U.S. would default on its debts and obligation payments, which will have a serious and negative effect on the stock and bond market and cause another financial crisis.
The obvious solution is for the government to stop borrowing money; there are only two ways to do this. One is to reduce government spending, and the other is to raise taxes to increase government revenue. Though it would be optimal to do both, it is not that easy.
On top of that, the Republican strategy for next year appears to be to prevent Obama’s re-election in any way possible, which will make the debt ceiling fight even more severe than the one that threatened a government shutdown.
One assumes that a solution will be found after a serious clash between both parties, but not after a nasty political fight. After all, there is no easy way to reduce government spending. Sixty percent of the federal budget is spent on so-called mandatory entitlements such as those payments for Medicare (to those over 65) and Social Security.
Cutting these would anger not only those over 65, but also those over 50 who are near retirement after having contributed to Social Security all throughout their lives. By the way, these generations also have the highest voting rates. However, there is no easy way to raise taxes, either.
The Democrats argue that the tax rate for the upper economic classes should be raised, but the Republicans demand that the top tax rate should be reduced from the current 35 percent to only 25 percent. Since their positions are so far apart, an agreement would be really difficult to reach.
The current $14 trillion debt, which equals out to $52,000 of debt for each American, would not make it easy for Obama to call for a debt increase. However, raising taxes would face severe resistance from the Republicans, and cutting spending would open the door for Republicans to nullify the health care reform for which Obama has risked his political life.
Furthermore, there are 87 first-term Republican representatives supported by the far-rightwing Tea Partiers, all of whom strongly oppose raising the debt limit and will be extremely hard to persuade otherwise.
In Korea, there is never a government shutdown. A case like in the U.S., where a temporary budget is put into place without an agreement on the 2011 budget until half of the 2011 fiscal year (from Oct. 1, 2010 to Sept. 30, 2011) has passed seems to me like putting the nation on life support to extend its life for a couple of months at a time.
For example, though the first four temporary budgets were nearly similar to the previous year, the fifth one (passed in early March and lasting two weeks) contained a $40 billion cut and the sixth (passed in mid-March and lasting three weeks) contained a $60 billion cut. That sixth temporary budget ended on midnight on April 8, which would have caused the shutdown. Fortunately, a $38 billion cut was agreed, and the budget that would last until September was passed. How can this be a good thing?
In Korea, if a budget bill fails to pass 30 days before the deadline, the President can automatically use the previous year’s budget temporarily. I think it’s better for the U.S. to adopt the Korean system to negate the chances of a government shutdown and debt limit issues and to simply reduce the budget process. In this way, the National Assembly of Korea, despite the occasional physical scuffle, actually looks more efficient.
Jay Kim is a former U.S. congressman. He serves as chairman of the Washington Korean-American Forum. For more information, visit Kim’s website (www.jayckim.com).