Another fine mess you’ve gotten us into
By David H. Landon
August 2, on our day of reckoning, President Obama signed the much debated, much derided, debt ceiling legislation. By passing the legislation to raise the debt limit, the nation was supposed to escape the financial Armageddon that the administration assured us would occur if the debt ceiling was not raised by the U.S. government. After months of debate, a compromise was crafted giving Treasury Secretary Geithner the authority to borrow more money. Americans awakened on Wednesday morning reassured that the “full faith and credit” of the U.S. was still intact. Countries the world-over could once again purchase U.S. bonds with confidence that the U.S. was not about to default on its massive debt. Unfortunately, as the markets dramatically demonstrated in the days since Obama signed the legislation, in reality, we may have once again kicked the proverbial “day-of-reckoning can” down the street. Our government has again failed to deal with the fundamental problem – a government that continues to spend too much money.
After the markets dropped 512 points Thursday, as if to put an exclamation point on a very bad week for the U.S. economy, Standard and Poor (S&P) dropped the U.S. credit rating for the first time in U.S. history. No matter how the administration tries to spin it, S&P’s downgrading America to an AAA credit rating is a blow to the credibility of the Obama administration. It is, in fact, a real world report card on Obama’s Keynesian approach to his handling of the economy.
Sunday talk shows broadcast administration apologists hard at work trying to pass the blame for the downturn. On Face the Nation, David Axelrod, Obama’s Chicago hit-man-in-chief, called the S&P reprimand “a Tea Party downgrade.” That’s right. Clearly it’s the Tea Party who is responsible for the reduction of the U.S. credit rating. Let’s blame the group that is demanding the government take the radical and reckless step of spending no more than it takes in.
The Obama team is scrambling for cover and the plan that is emerging is to blame it all on the Tea Party and vilify them in the process. Democrat Congressman Mike Doyle expressed his outrage over the debt-ceiling negotiations with the Republicans and the Tea Party stating, “We have negotiated with terrorists … This small group of terrorists [have] made it impossible to spend any money.” Really Congressman? Are you serious? They made it “impossible to spend any money?” You’ve done little else since Obama became the “spender-in-chief” but spend money. And you have spent in record amounts. This fiscal year, the federal government is projected to spend $3.8 trillion. That’s trillion with a “T.” The revenues coming into the federal government are projected to be $2.2 trillion. That means that the government is spending of $1.6 trillion more than it is taking in. They talk and act as if the Tea Party held a gun to their collective congressional heads and told Obama, “Stop your lousy spending or the spendthrifts get it!” No congressman, the Tea Party and Republican conservatives simply want you to live within your means.
So what did the debt ceiling deal accomplish towards reducing the rate at which the federal government spends money? I’m afraid it accomplished very little. In exchange for increasing the debt ceiling by $2.1 trillion, the bill cuts spending by $900 billion over 10 years. The limit increase will happen in three steps: $400 billion immediately, followed by another $500 billion, then the remainder after Congress tries to enact further deficit reduction and pass a Balanced Budget Amendment. The issue of future spending cuts then goes to a Super Legislative Committee made up of six Republicans and six Democrats, which will come up with an additional $1.2 trillion in cuts. Whether or not Congress successfully enacts another deficit reduction law in the fall, the total reduction must exceed the debt limit increase available to the president. If Congress fails to agree on cuts this fall, some of that reduction will happen through automatically triggered spending cuts.
Let me explain it another way. Here’s an example that a conservative friend posted on his blog that helps illustrate the point. If the U.S. government were a family, they would have an income of $58,000 a year; however they are spending $75,000 a year and that family is presently $327,000 in credit card debt. In order to stave off economic disaster and to convince the credit card companies to raise their debt limit, they work for months on a plan to cut back on their spending. Finally, they propose spending cuts to reduce their spending from $75,000 to $72,000 a year. These numbers are proportional to the federal budget and debt. After the weeks of wrangling, the family in this example, much like our federal government, is still spending too much money and has not done what is needed to avoid a catastrophe in the near future.
While no one got what they wanted, everyone got something in the deal. For the president, the issue of raising the debt ceiling again is now pushed beyond the 2012 election. For the Republicans, some spending cuts were accomplished without raising taxes. For Democrats, they protected their sacred cows (entitlements) and can still claim to have supported the concept of reducing the size of government.
Pundits are opining about who were the winners and who were the losers in the debt ceiling compromise. It’s really hard to see any winners, but the losers are clearly the next generation of Americans who will be saddled with our enormous debt for years into the future, because our government couldn’t stop spending money it didn’t have.
David H. Landon is the former Chairman of the Montgomery County Republican Party Central Committee. He can be reached at DaveLandon@DaytonCityPaper.com