The meeting. Budget talks stalled again.

The meeting between House Republicans and the President today were described as frosty and cool. If the nation’s debt limit isn’t raised within the next 63 days, the economy is the one that’s going to be iced. And today’s events proved the debt ceiling fight will probably boil down to medicare with polls running strongly against republicans? on this issue. Democrats have an opportunity to stay firm or needlessly fold. More than 100 House Republicans filed into the White House today just look at that line. There they go. And this meeting as described again, frosty and cool. this according to Republican Congressman Phil Gingrey. In the wake of the GOP’s big loss in the New York 26 district special election, Republicans were on the defensive on the issue of medicare and the architect of the GOP medicare plan, Congressman Paul Ryan says he asked the President to stop calling it a voucher program.

I just said we got to take on this debt. and if we demagogue each other at the leadership level then we’ll never take on our debt. It’s been misdescribed by the President and many others. So we simply described to him precisely what it is we’ve been proposing so he hears from us how our proposal works so that in the future he won’t mischaracterize it.

On the other side of things, Jay Carney says the President has not been mischaracterizing this plan.

Is that what the President thinks he’s doing? Is he misdescribing this plan?

No, he doesn’t. Look. As I said, there is no question that there are differences. and what the President has made clear is that he doesn’t believe that we need to end medicare as we know it, to dismantle the program as it currently exists in order to achieve significant deficit reduction.

Reporter: and the White House is still framing the debate this way.

In order to achieve the reductions that they seek in the House Republican plan and to pay for the extensive tax cuts for the wealthy that that plan calls for, they need to do things to medicare that aren’t necessary.

And Democrats might take heart that a new poll shows Americans solidly are against Ryan’s medicare plan. 54% to 38%. And on medicare, voters trust the President more than Congressional Republicans. 47% to 39%. House speaker John Boehner released a letter in which 150 economists support his premise of deep spending cuts that exceed any increase in the debt limit. But as Media Matters notes, at least 46 economists from Boehner’s letter called the 2003 Bush tax cuts fiscally responsible. and several of Boehner’s 150 economists have used extreme rhetoric to attack President Obama. Now today, Republicans once again ruled out the uncertainty talking point.

If we’re going to get serious about creating jobs in America, we’ve got to reduce some of the uncertainty. Some of that uncertainty is caused by the giant debt facing our country.

But as a broad spectrum of experts have noted, the greatest uncertainty threatening the economy right now is uncertainty over whether the debt limit will actually be raised come August 2nd. Let’s bring in Representative Peter Welch. I want to be blunt. Are Republicans holding the debt ceiling hostage, and are Democrats basically falling for it, hook, line and sinker?

They are holding it hostage. It’s a very dangerous game. The market went down nearly 300 points today. Bottom line, it’s a politically uncomfortable vote to raise the debt ceiling but the basic question is this — does America pay its bills? We always have. We always will. and in politics, you try to leverage whatever advantage you can get. Republicans do it, Democrats do it. But at a certain point, you have to exercise restraint and responsibility. We have to pay our bills. Otherwise, we’re playing with a loaded gun. Russian roulette in the American economy is on the receiving end of that bullet.

Congressman, on the surface, Democrats do appear to be winning this fight over medicare. Basically, the simple reason is the public likes medicare. However, Republicans, they are complaining the Ryan plan is being mischaracterized. In your opinion is that a fair estimation or not?

It’s not. You know, health — medicare provides security to us  Americans, 65 and older. They have access to health care. Keep in mind, the Republicans in the House not only are about abolishing medicare for 55 and under Americans, but they abolish the insurance reforms that would allow you to get access to coverage if you have a pre-existing condition. So under their plan, if you are under 55, when you turn 65, you are subject to an insurance company saying yes or no on whether they’ll insure you. Now that assumes that you can even afford it. sS, no, it’s not. So now the issue on health care is about the cost of health care that is escalating two and three times the rate of inflation, wages and profit growth. And the Democrats, they have acknowledged we have to reform and control the cost of health care, but we’re not going to attack medicare. Absolutely not.

Today’s meeting was meant to augment these ongoing Biden talks in which the White House and Congressional leaders are looking at more than $1 trillion in budget cuts. Republicans want medicare to somehow be a part of that. Do you think ultimately that it’s going to be, sir?

I don’t. What can be part of it is reforms in the delivery system of health care in general. Because the challenges in medicare, that is the — how attach costs, are the challenges that we face in health care. So employers who are providing health care are getting hammered with health care premium increases. Individuals who are getting — trying to buy private insurance are getting hammered with increases. That, obviously, is a factor in the cost of medicare because it’s part of health care. So the Democrats are at the table. Let’s reform health care. Let’s do price negotiation with prescription drugs. Let’s transform the payment system from the fee for service volume driven approach to a pay for value driven approach. There’s lots of things that we need to do to have more affordable and better health care. But one of the things that is absolutely essential for American security and middle class security in this time of enormous pressure in the economy is to maintain the guarantee that when you are 65 and you’ve been paying into health care, medicare all your life, you are going to get it.

While we have you here, I need to talk about the debt ceiling because we have that date of August 2nd looming. Analysts have been saying for months that unlike typical budget negotiations, the debt ceiling vote cannot be dragged out to the final day. Without risking some serious economic impacts. Is this going to be a horse to water with all of you guys getting us up to this date and then something going to happen at the very last minute and then we have to deal with whatever economic impact has happened over this summer?

Well, see, I think that’s an extraordinarily dangerous game. I think both sides have to acknowledge that we cannot play Russian roulette with the American economy. When we were talking about the continuing resolution and keeping the lights on in government for another six months, we could go to the midnight hour. If we went past it, there wouldn’t be a lot of harm. Some inconvenience. but once we rattle the markets where they believe that we’re not going to be capable to pay our bills, then that market will turn suddenly and it will turn savagely and the lasting damage to this economy will be devastating. Any member of Congress who is part of that effort and wants to overextend their hand on this leverage game is going to reap the whirlwind.

Congressman Peter Welch, thanks for joining us. We appreciate your time.

Of course, medicare is not the only entitlement under threat from the GOP budget. House Republicans propose blocking grants for medicaid which is also strongly opposed by Democrats. House Minority Leader Nancy Pelosi addressed both those issues today.

I think the Republicans deserve credit for doing what they believe. and they do not believe in medicare and medicaid. But I think as they find out what the ramifications are of their actions, you will see something different. I don’t see them blocking grants to medicaid. I really don’t.

Let’s turn to former Secretary of Labor under President Bill Clinton, Robert Reich, now a Professor of public Policy at the University of California at Berkeley. Professor, it’s good to see you. Twice in one day. Quite an honor.

Good evening, Thomas. How are you?

I’m great, thanks. Let’s get back to what Speaker Boehner is talking about. When it comes do uncertainty. Explain what uncertainty is over the debt limit deadline and what it could do ultimately to the economy as I was talking to the Congressman, if we drag this out until August 2nd.

There’s no doubt. I don’t know that anybody in the capital markets, in the United States or around the world believes that the United States is not going to raise the debt limit. The full, faith and credit of the United States is so important and so basic to the global capital market that they are — the debt limit will be raised. This is just an elaborate game of chicken going on between Republicans and primary — basically the Tea Party wing of the Republican party saying, look, we will not do anything. We will not swerve in this game of chicken. And Democrats who say, look, you’ve got to at least consider some tax increases on the wealthy to get the long-term budget deficit down. But, Thomas, if I can just say one thing. I think that this debate that’s going on in Washington right now, although it’s very important, and all the Democrats, I believe, are absolutely correct, this debate is becoming increasingly disconnected from where most people in this economy are. I mean, the reason that the stock market plunged today is because ADP, which is a payroll, employee payroll firm, projected that in this month, that is last month of May, there were only 38,000 jobs created. I mean, we’re in an economic crisis right now. We’re heading back toward a double-dip recession. The whole recovery is stalling. and Washington is debating budget deficits five or ten years from now. This is ridiculous.

I want you to take a minute to listen to what Speaker Boehner had to say today and then we’ll talk on the other side.

If we’re going to raise the debt limit, the spending cuts should exceed the increase in the debt limit. Otherwise, it will serve to cost us jobs in our country.

How does that make sense?

It doesn’t make any sense at all. The reason we don’t have jobs right now is because consumers are afraid that they’re going to lose their jobs or they don’t have enough money in their pockets. We’re actually seeing wages adjusted for inflation dropping. Hourly wages, 80% of Americans, supervisory or production workers, their hourly wages are dropping. They are worried about their, you know, their jobs. Housing values have dropped 33% since 2006. That’s a larger drop, Thomas, than we’ve seen in this country since the great depression. I mean, if the major asset of most people, which is their homes, takes that much of a cut, people are not going to go out and buy. And if people don’t go out and buy, then we’re going to have a return to a recession. It’s because consumers, American consumers, the vast middle class simply doesn’t have the purchasing power to continue to buy. That’s the key problem right now. It has nothing to do with the budget deficit five or ten years from now. The Republicans don’t know what they’re talking about.

Certainly homeownership is not the nest egg it used to be. I want to get your opinion on medicare and medicaid. Does it appear Republicans are using this crisis to ask for cuts that aren’t necessary as the White House has been suggesting?

Well, of course. They want to cut medicare, medicaid, get rid of food stamps. I mean, Republicans have hated medicare and medicaid ever since they were created. They were created, at least in the Republican mind, on the model of the New Deal program, social security. And, you know, these are absolutely an anathema to Republicans. They represent big government. The problem is, at least for Republicans, most Americans love medicare. They love social security. They also happen to love medicaid because medicaid is the last resort for a lot of Americans and a lot of seniors who have no other way of basically keeping going. And so what we’re having is this disjuncture between the ideology of the Republican party right now and where most Americans are on these fundamental social safety nets. And Democrats, look, obviously, Democrats are playing on this and Democrats have every right to play on it.

Robert Reich, author of “Aftershock.” Nice to spend more time with you today.

Thanks, Thomas.

Transcribed by the Barefoot Accountant of Accountants CPA Hartford, Connecticut, LLC

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About William Brighenti

William Brighenti is a Certified Public Accountant, Certified QuickBooks ProAdvisor, and Certified Business Valuation Analyst. Bill began his career in public accounting in 1979. Since then he has worked at various public accounting firms throughout Connecticut. Bill received a Master of Science in Professional Accounting degree from the University of Hartford, after attending the University of Connecticut and Central Connecticut State University for his Bachelor of Arts and Master of Arts degrees. He subsequently attended Purdue University for doctoral studies in Accounting and Quantitative Methods in Business. Bill has instructed graduate and undergraduate courses in Accounting, Auditing, and other subjects at the University of Hartford, Central Connecticut State University, Hartford State Technical College, and Purdue University. He also taught GMAT and CPA Exam Review Classes at the Stanley H. Kaplan Educational Center and at Person-Wolinsky, and is certified to teach trade-related subjects at Connecticut Vocational Technical Schools. His articles on tax and accounting have been published in several professional journals throughout the country as well as on several accounting websites. William was born and raised in New Britain, Connecticut, and served on the City's Board of Finance and Taxation as well as its City Plan Commission. In addition to the blog, Accounting and Taxes Simplified, Bill writes a blog, "The Barefoot Accountant", for the Accounting Web, a Sift Media publication.
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