We are in desperate need of superior leadership

There is another dilemma facing politicians regarding the debt ceiling. If the debt ceiling is not increased, the U.S. government will have to make drastic cuts in spending. This will have a negative impact in the short term on both the economy and the AAA credit rating of U.S. debt by the rating agencies. According to a recent Wall Street Journal/NBC poll, 55 percent of Americans believe that not raising the debt ceiling will create serious problems. Unfortunately, if the debt ceiling is increased without a major restructuring of the government’s budget, leading to a balanced budget, the deficits and national debt will continue to grow. This will also have a negative impact on the long-term prospects for the economy and the government’s credit rating. Furthermore, it will push the deficit and debt crisis into the future, when they will be even more painful to solve.

In the debate on raising the debt ceiling above the current level of $14.3 trillion, neither the Republicans nor the Democrats have a winning political strategy. Both parties agree that the current and projected deficit is too large. The best solution to balancing the budget and reducing the national debt depends on one’s political philosophy. If you are a conservative, you want to cut spending, including entitlement spending, and reduce marginal tax rates. Let private-sector growth generate increased individual income and increased tax revenues. If you are a liberal, you want to keep government big, increase entitlements and finance it all with other people’s money, i.e., increased taxes on the rich. While that path might not grow the income of the country as fast as the conservative philosophy, liberals believe that Americans will be better off, because elected politicians, not the free market, will “fairly” allocate and redistribute America’s income according to their political goals.

Fortunately for the Republicans’ election prospects in 2012, but unfortunately for America, on President Obama’s watch the economic recovery has been a disaster. The only thing that matters to most Americans right now is jobs and economic well-being. When Obama took office in January 2009, the labor participation rate was 64.8 percent compared to 64.1 percent in June 2011, and the unemployment rate was 8 percent versus 9.2 percent today. Voters are much less concerned about political philosophy than their actual economic well-being. Consequently, the political debate over the debt ceiling is a sideshow for most Americans. The political class needs to accept the fact that neither side will be able to emerge with a clear victory from the debt-ceiling debate, which is merely one battle in a much larger ideological conflict.