The House is in the first phase of attempting to pass a balanced budget amendment. The members will vote today on the "Cut, Cap and Balance" bill which includes a $2.4 debt ceiling increase.
But here's the caveat, the debt ceiling increase will only happen if both houses of Congress approve a balanced budget amendment. While the measure is expected to pass in the GOP lead House, political fisticuffs will be unleashed in the Senate.
I decided to speak with two members of Congress on this issue.
Representative Kevin Brady (R-TX), the Majority Deputy Whip and member of the all powerful Ways Committee, and Representative Charlie Rangel (D-NY), Senior member of the Ways and Means Committee and Vice Chairman for the Joint Committee on Taxation on their outlooks of this political tug of war.
LL: Are you confident Congress will come to an agreement and raise the debt ceiling?
Rep.Rangel: Yes. I am confident. And the only reason why I am confident is because if anyone is intelligent enough to get elected to the U.S. Congress has to recognize how devastating it would be to our country and to our international community if we didn't do it.
I have been here 41 years and I have never seen the polarization that exists today and quite frankly, we do have certain people that have been elected in the Republican Party that have committed themselves publicly and politically not support anything that President Obama suggests. And that includes the debt ceiling, includes the deficit, taxes and jobs legislation. And their votes have been consistently against Obama.
How they will be able to justify their campaign commitments I will never know and that is one of the problems Speaker Boehner faces today.
LL: The Tea Party is irrelevant when it comes to passing a debt ceiling if both sides can agree on something where the moderates from both sides can support. What do you hope to see in terms of a deficit plan?
Rep.Rangel: I don't think it has been confusing as to what the Democrats position has been. The President says he will cut back on entitlements and make sure the government and programs like education are not stopped because we are so severely indebted. In order to do this, all economists at least I read and have heard from, believe there are two ways to do it. One- severe cuts from our current budget and future revenue.
I say future revenue because there are trillions of dollars in unnecessary, inexcusable deductions and preferential treatments to the wealthy people who have seen a boom and an explosion in their income and multinational corporations who have never seen in the history of the United States these types of record profits.
To close these loop holes, to provide the revenues to save some problems, is now being interpreted by some, the same group of people who have joined the Republican Party in the House as being "tax increases", and they will not vote for them. So, it doesn't make any economic or common sense because they are standing by what they committed to the people who elected them here. They find it very difficult in the face of common sense to reverse their political commitment.
LL: One of the arguments to closing these tax loop holes is it will impact job creation. What do you say to that argument?
Rep. Rangel: First of all, the largest loop holes are the incentives we gave years ago to the oil industry. And at that point, they were crippled economically, and they needed a shot in the arm to keep the industry profitable. Since that time, they have had record profits.
They have enjoyed the highest incomes and the last thing in the world they would need is an incentive. It is absolutely ridiculous when someone has enormous profits they should ask the country to help them with an incentive.
So, certainly you would not be losing any jobs there.We have other things in the tax code where certain people which provide certain services are treated as though the earnings they receive are capital gains when indeed it ought to be taxed as ordinary income. No one challenges that. We're talking about Wall Street. And again, Wall Street is making record profits. And so there is no way in losing jobs there.
As a matter of fact, and if you want to talk jobs loss, talk about the cuts that will be existing especially to the local and state subdivisions where the city is cutting jobs, the state will be cutting jobs, the hospitals will be cutting jobs, schools, police, firemen.... all of the cutbacks mean what?
Personnel will be laid off and they will not be able to buy the goods and services they need and what does that mean? It means not only will they lose their jobs, but the everyday purchases they make to the small businesses in the communities where they work and live will stop, the businesses then will not be able to sell anything and they will be laying off their workers.
So, we're talking about job losses by slashing programs. We have to. But cutting programs doesn't mean you're just saving money. Its ridiculous to knock some people off a productive payroll and come back and have to give them on extended unemployment compensation.
LL: What about ethanol? Do you think the ethanol subsidies should be eliminated?
Rep.Rangel: There's no question. There are a couple of powerful people in the Senate to allow this nonsense incentive which has proven not to be effective. You say corn and you say ethanol... even if it would be an alternative to fossil fuel, look at what it is doing to the world food supply. It is terrible. I have not heard anyone with a straight face defend the ethanol subsidy.
LL: You were talking a few minutes ago about the municipalities.
Moody's said they will cut 7,000 municipalities if the U.S. is downgraded. If they are downgraded, they will be faced with higher borrowing costs which could further impact them in terms of cash flow.
Are you concerned that the downgrades could create more job losses?
Rep. Rangel: Not really. If people in the House and Senate are not concerned and are now aware of what not raising the debt ceiling would do to the U.S. economy, the world, the U.S. security and each and every American in our community, then let what Boehner has said, so be it.
It took 200 years for this great country to get where we are. Why should we think we would be so dumb, so indifferent, so politically opposed to Obama that we would sacrifice all the lives that have been lost for this country, to see us go down the tube on stubbornness. I think a half a dozen people are going to get together and realize this game of political chicken they are playing is just too dangerous. Investors are coming forward, Wall Street has finally woken up.
LL: Congressman Brady,Rep. Himes told me he is worried some House members view this as a shutdown. This is no shutdown. We are talking about the full faith and credit of the United States here. Are you concerned some members don't get it?
Rep. Brady: I think that our leadership, the Speaker and Eric Cantor, have kept our Members well informed with what's at stake if America fails to pay its debts. The warnings from Moody's and S&P last week serve as further reinforcement of the dire consequences that we face if we do not achieve serious budget restraint.
We are all working together to find solutions to tackle this problem, and I think this week's upcoming votes in the House and Senate are reflective of our respective solutions. At the end of the day, I have no doubt in my mind that we will pay our debts and restore confidence in our economy.
LL: Compromise is key to a deal, what are the Republicans trying to compromise on?
Rep. Brady: The Federal Government must learn to live within its means. If we are to treat the underlying disease and not just focus on the symptoms-debt, deficits, and potential default, we must get rid of the vices that brought us to this point: excessive spending, bloated government, and political posturing.
To that end, we are seeking a balanced agreement that combines real short term cuts, enforceable spending caps, and measures that will restrain spending by future Congresses. We also need to have an adult conversation on how we preserve entitlements. Compromise cannot begin until we see the President's secret plan, though he is well aware that Republicans will not support tax increases.
LL: With all this political bickering, Congress has painted themselves into a corner now with S&P and Moody's saying passing the debt ceiling is not enough. A deal showing serious deficit reduction is needed. Are you confident both sides will come together to make such a deal?
Rep. Brady: It has yet to be seen. The current situation is dire-but not unexpected. America has lived outside of its means for far too long, and the question remains whether Washington will put in place the cuts and restraints on future spending that will return our nation to a sound financial basis.
A Senior Talent Producer at CNBC, and author of "Thriving in the New Economy:Lessons from Today's Top Business Minds."
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