1 Aug
2011
Posted in: Blog
By    2 Comments

Kickin’ the Old Can

The big news last night and this morning is that Congressional leaders have agreed on a plan that the White House isn’t threatening to veto.  The deal, as reported by CNN, includes $2.4 trillion in spending cuts “savings” over the next decade, does not raise taxes, and raises the debt ceiling by $400 billion immediately, followed by another $500 billion pending Congressional approval.  Finally, a commission is established whose goal will be to identify how to shave $1.5 trillion off the deficit (debt?) by the end of November.  As CNN explains,

If the committee’s recommendations are enacted, Obama would be authorized to increase the debt ceiling by up to $1.5 trillion. If the recommendations are not enacted, Obama can still raise the debt ceiling by $1.2 trillion. At that point, however, a so-called budget “trigger” would kick in, imposing mandatory across-the-board spending cuts matching the size of the debt ceiling increase.

Sound reasonable?  Consider:

  1. The committee, who will be responsible for the brunt of the task, will have the authority to raise taxes.  Boehner may have avoided immediate tax increases, but in another few months Democrats will likely again be clamoring for higher rates.
  2. $2.4 trillion over a decade works out to $240 billion/year, a paltry 15% of the expected $1.6 trillion deficit in 2011.
  3. In fuzzy D.C. logic, the $2.4 trillion in “savings” assumes a baseline increase of federal spending by 8% annually, and works off that assumption.  In other words, if the federal government’s spending increases by “only” 5% per year, as opposed to the planned 8%, this is considered savings, even though total spending has still increased.
  4. Constitutionally permissible defense spending will be on the chopping block.  The agreement does nothing to slow the growth in the boondoggles that are domestic spending programs, such as the atrociously suffocating Obamacare.
  5. Entitlements remain untouched.  Somewhere between $60 – $100 trillion in unfunded liabilities exist and are still being ignored.
  6. Republicans have spent virtually all of their political capital, and worn the country’s patience thin.  Cynicism abounds.

Imagine, if instead of working with Democrats, Republicans mounted a huge public relations campaign to bolster support for the Ryan budget and the Balanced Budget Amendment.  Entitlement reform, credible deficit reduction without taxes, and long term financial health could have been achieved.  The plan was popular with the people, as was the Balanced Budget Amendment.

Those of us who don’t think like the Beltway cretins should not deceive ourselves; the establishment kicked the can down the road with this compromise, will spend more of our money that we don’t have, and proved once again that our elected officials are far out of touch with the public.  Tea Party activists, despite being dumped on by the mainstream media, despite being called “hobbits” by the reactionary Wall Street Journal, despite being regarded as sub-humans by what many rightly refer to as our “ruling class,” are more in line with the vast majority of Americans than ever before.

Drivel like this won’t much longer be tolerated.  (“The trigger,” writes Julian Zelizer,” to this crisis, which threatens the health of the nation’s economy, was an aggressive move by tea party Republicans — hesitantly supported by the House leadership — to hold routine debt ceiling legislation hostage until they received exactly the spending cuts they demanded.” emphasis added)  What threatens our economy, and frankly our Republic, is not spending cuts, but a debt and government that looks like it may swallow the entire American people, enslaving them to their government and its rationing/regulations as the British are enslaved to theirs.

I consider this a lost battle.  Millions remain unemployed and the economy stagnant, even as Washington pats itself on the back.  National debt and spending will both increase as a result of this deal, likely with taxes.  The Republican leadership has shown themselves not as opponents to endless debt and decline, but instead as co-conspirators.  Serious activists looking to restore fiscal sanity must redouble their efforts, and pin all the failures of this compromise on Obama, Reid, McConnell, Boehner, and Liberalism.  Our case for cutting spending will be easier to make as a result of such pathetic half measures, even as our situation grows more perilous.

Surely such indecisive and gimmicky legislation is indicative of a great nation committing suicide.  A speaker more concerned about acceptance by the news media than the future of his country and welfare of the disenfranchised, and a president determined to fundamentally change our longstanding institutions – two so-called leaders complacent with a deal that does virtually nothing but maintain the status quo.   For my part, to aid in understanding, I’ve undertaken reading Saint Augustine’s City of God, which traces the decline of the Roman Empire through the erosion in character of its citizens.  Does the American citizen possess enough fortitude to overcome an entrenched and reckless lawmaking and bureaucratic establishment, hellbent on destroying what remains of American freedom?  Is there enough resolve in Conservatives to fight back the socialists, and those who would centralize the most trivial decisions, from the type of food you eat to what you use to light your home?  Do Americans retain a self-confidence enough to tell their rulers to buzz off, or will they look to government to manage their finances, health care, energy consumption, transportation, and diet?   This remains the question of our day.

Wait until 2012, they said.  Now we’ll have to.  To win the next battle and eventually the war, conservatives must retake the Republican party.  Squishes must be primaried and Democrats defeated.  When two-thirds of the citizenry approve of a balance budget amendment, the odds favor us.  Boehner must be replaced by a leader who understands what is at stake, and who can communicate with and echo the will of the people.

DISCLAIMER: This post and the contents thereof are the views of only the author identified immediately above and do not necessarily represent the views of the New York Young Republican Club (the "NYYRC"), its officers or its members. The NYYRC expressly disclaims responsibility for the contents thereof and by its charter documents may not, and does not, endorse any candidate for any office, except in a general election.

2 Comments

  • It is true the deal prevented the United States from defaulting, but Standard and Poor said the reason they downgraded our credit rating to AA is becuse Congress and the Obama Administration did not cut enough spending. The deal should have cut a little more spending then it did.

  • Actually Lev, it’s untrue that the deal prevented us from defaulting. We were never in danger of a default, as we only owe $29 billion per month in interest payments, and take in $200 billion per month in revenues.

    See here:
    http://blogs.marketwatch.com/fundmastery/2011/07/12/the-u-s-treasury-will-not-default/

    From the article…
    The U.S. Treasury will not default
    July 12, 2011, 2:52 PM
    By Kurt Brouwer

    Despite all the rhetoric and posturing we see in the media and in Washington D.C., it is safe to say categorically that the U.S. Treasury will not default on its debt after August 2nd, even if the debt ceiling is not raised. Not only will the Treasury be able to pay interest on U.S. debt obligations, but there is money for other essential programs as well. However, there will be some serious cutting that has to happen because spending clearly exceeds revenues.

    I believe a debt ceiling limit extension will be enacted. However, let’s consider what might happen if the debt ceiling limit is not raised. Here in a Q&A format is what I believe you need to know at a basic level.

    Q: What is a default?

    A: In this case, a default would be the failure by the U.S. Treasury to make payments of principal or interest on its debt in a timely manner.

    Q: In a given month how much does the Treasury owe as interest on its debt?

    A: Roughly about $15–20 billion (more on this in a moment).

    Q: How much revenue does the Treasury take in on average in a month?

    A: Roughly about $200 billion.

    Q: Are you saying the Treasury could pay interest on its debt 10 times over (or more) from monthly income?

    A: Yes. Therefore the likelihood of not paying interest on its debt is zero.

    Q: But, what about redeeming bonds that come due?

    A: As bonds come due, the Treasury would again use monthly income to pay them off. This would lower the debt owed beneath the so-called debt ceiling. Then, the Treasury could turn around and issue debt in that amount up to the debt ceiling.

    Q: Why then do Treasury Secretary Geithner and others in government make such apocalyptic statement about the horrors of default.

    A: I’m afraid Secretary Geithner and others in government are doing the moral equivalent of yelling “Fire!” in a crowded theater and they are doing so for political reasons rather than financial reasons. They simply do not want any interruptions in the bloated spending underway in Washington and they want to scare Americans into thinking the end of the world is nigh unless the gravy train keeps chugging along.