Republican debt bill only rearranges deck chairs on Titanic. By Nathaniel Sheppard Jr.

The passage Friday evening of House Speaker John Boehner’s bill to raise the US debt ceiling does nothing to move the nation away from a potential default on its debts next week that could plunge it back into a recession and roil financial markets worldwide. Little wonder that Harry Reid’s Democrat-dominated Senate rejected it late Friday evening.

Not only is the US left on the brink of losing the dollar’s status as the reserve currency and its own status as the world’s best place to invest capital but it faces the prospect of hyper inflation, the loss of jobs at a time of 10.2 percent unemployment, higher personal credit costs and spiraling costs for goods and services.

The world has looked to the US for financial stability but has already had its confidence shaken by credit crises in 2008 and 2009. Another disruption could cause havoc in still weak European markets where rising concern over runaway government deficits and downgrading of euro zone debt last year spooked financial markets.

The Republican bill, approved by a 218-210 vote with no Democratic support, would trim about $900 billion in federal spending over 10 years in exchange for an increase in the debt ceiling that would cover borrowing only through the end of the fiscal year which ends September 30. (The Senate rejected the bill 59-41.)

It would mandate a congressional committee directed to find $1.8 trillion in additional cuts as a condition of subsequent increases in the ceiling. A second increase also would be dependent on Congress passing a balanced budget amendment, a sop to the ultra conservative Tea Party wing of the party, which has said it will not support any bill that does not include such a requirement.

President Barack Obama has said that he will veto any bill that does not raise the debt ceiling through 2012. The Boehner bill went to the Democrat-controlled Senate where Majority Leader Sen. Harry Reid said it would be dead on arrival. And indeed it died.

Democrats said the bill did little to seriously address the nation’s debt crisis. “Never in our history has there been an intentional disaster perpetrated by the very people who were elected to be the caretakers of this country,” said Rep. Kathy Hochul of New York in delivering the closing Democrat argument against passage of the bill. “That is exactly what will happen if we refuse to take action to prevent default and pay our nation’s bills now.”

“We’ve tried our level best,” Representative Boehner said. “I stuck my neck out a mile to try to get an agreement with the president of the United States.” The statements illustrate how world’s apart the two sides are on a compromise solution.

As the clock ticks closer to August 2 when the US would run out of money to pay its bill under current debt authorization, Senator Reid said he thought Senate Democrats would be able to craft an alternate proposal palatable to Republican moderates in that chamber.

The math behind the debt crisis is against the ideological solutions being pushed by both sides in their efforts to protect party sacred cows. Republicans want structural reforms, steep cuts in spending, a requirement for a balanced budget and no new taxes.

Democrats argue that new revenues are a must to meet the costs of maintaining social programs at the core of its agenda and costly entitlement programs such as Social Security and Medicare, which the party is reluctant to touch.

According to the Congressional Budget Office, the federal government is expected to spend roughly $688 billion on discretionary programs and $1.05 trillion on mandatory programs in the second half of the fiscal year ending September 30.

If the debt limit is not raised and all discretionary spending in that period were eliminated, the government still would have to find further savings to cover its borrowing needs, the agency said.

Alternatively, the government could cover its borrowing needs by cutting 70 percent of expenditures for mandatory programs.

On the revenue side, the federal government is expected to collect roughly $1.114 trillion in the period. To cover the $738 billion in borrowing needs solely by increasing revenues, the government would have to raise taxes by about two-thirds.

Clearly both sides have to give in on big-ticket items if a compromise plan is to be reached. So far, each has been unwilling to do so. What we see now is smoke and mirrors and kabuki theater.

Since the beginning of the year, Congress and the have played a timed game of Russian roulette with the debt ceiling crisis. Now that time has about run out and all but one chamber of the gun have been tried, it is questionable whether they have the sense to end the game now when there is a chance for survival.

(Nathaniel Sheppard Jr. is a veteran national and foreign correspondent who worked for The Chicago tribune and The New York Times. He can be reached at: [email protected])