Posted on 01/19/2011 6:48:07 AM PST by SeekAndFind
As Congress prepares for a vital debate over debt, deficits, and government spending, there is reason to be concerned that the GOP is engaging in a bit of unilateral disarmament.
Over the weekend, several Republican spokesmen, including House majority leader Eric Cantor and House Budget Committee chairman Paul Ryan, indicated that they would, in fact, support increasing the nation’s $14.3 trillion debt limit when it comes up for a vote in March. Of course, they also said that they would use the vote as “leverage” to demand spending cuts. But how much leverage is there likely to be if they have already conceded the final vote? After all, a threat only works if the other side believes that you will act on it.
Of course the Obama administration is already warning of Armageddon if Congress doesn’t raise the debt ceiling. Certainly it would be a shock to the economic system. The bond market could crash. The impact would be felt at home and abroad.
But would it necessarily be worse than the alternative?
While Congress has never before refused to raise the debt ceiling, it has in fact frequently taken its time about doing so. In 1985, for example, Congress waited nearly three months after the debt limit was reached before it authorized a permanent increase. In 1995, four and a half months passed between the time that the government hit its statutory limit and the time Congress acted. And in 2002, Congress delayed raising the debt ceiling for three months. It took three months to raise the debt limit back in 1985 as well. In none of those cases did the world end.
More important, what will be the consequences if the U.S. government fails to reduce government spending? What happens if we raise the debt ceiling then continue merrily on our way spending more and running up ever more debt?
Already Moody’s and Standard & Poor’s have warned that our credit rating might be reduced unless we get a handle on our national debt. We’ve heard a lot recently about the European debt crisis, but, as one senior Chinese banking official recently noted, in some ways the U.S. financial position is more perilous than Europe’s. “We should be clear in our minds that the fiscal situation in the United States is much worse than in Europe,” he recently told reporters. “In one or two years, when the European debt situation stabilizes, [the] attention of financial markets will definitely shift to the United States. At that time, U.S. Treasury bonds and the dollar will experience considerable declines.”
Moreover, unless we do something, federal spending is on course to consume 43 percent of GDP by the middle of the century. Throw in state and local spending, and government at all levels will take 60 cents out of every dollar produced in this country. Our economy will not long survive government spending at those levels.
If the debt ceiling is not increased, the Treasury can prioritize interest and debt payment to avoid a default and essentially put the government on a stringent pay-as-you-go basis. Would that involve extreme cuts in government spending? Certainly. But it could be done, if it had to.
If Republicans hold tough on the debt limit, they will have the public strongly on their side. According to the most recent Ipsos/Reuters poll, fully 71 percent of Americans oppose raising the debt ceiling. In fact, that number didn’t change even after people were told that “not raising the debt limit would damage the U.S. sovereign debt rating, which is like our credit rating: it would seriously damage our credibility abroad, would make it much more difficult for us to borrow in the future, and would likely push up interest rates.”
In the long-run, a limited increase in the debt ceiling might be negotiated in exchange for significant structural budgetary reforms designed to limit future government spending. But there is no reason for Republicans to surrender preemptively.
— Michael Tanner is a senior fellow at the Cato Institute and author of Leviathan on the Right: How Big-Government Conservatism Brought Down the Republican Revolution.
The price for a 6 month debt limit raise is the total repeal of Obamacare. And the repeal is signed first.
End of negotiation.
The sky would not have fallen and it would be a lot lighter, if the leftist hadn’t conned GW Bush into using trillions to “bailout” the bankers.
2nd worse mistake in US history.
That's right, they never had any intention to stop spending and every intention of increasing what they spend. They will have record numbers of "Omnibus" spending bills as well this year, after they quickly spend what they recently pass. Not even the FED can print worthless cash fast enough to keep up with them. I predict the Debt to hit 15 Trillion by the middle of this year.
If the House GOP votes to increase the debt limit without significant budgetary concessions from the White House - THROW THEM ALL OUT!
Hopefully, they’ll get the message.
I fear it’s all a dog and pony show - fiddling while our great capitalistic economic engine burns to the ground.
It’s so stupid to spray money the outside of the engine - but most people aren’t equipped with enough basic logic and reason to comprehend how stupid it is.
That’s exactly what I mean by spraying money outside the capitalistic economic engine - trillions have been sprayed outside the engine and people sit around and wonder why no economic power was produced. The reason is simple; fuel spayed outside an engine doesn’t produce power.
The capitalistic economic engine is the most powerful to ever run - it’s the goose that lays golden eggs - but we the people are allowing our politicians to kill it - to burn the engine down. What we need to do is demand our elected officials adopt a scorched earth retreat from the kind of spending that built up the 14 trillion in debt and pay it off. Can you imagine how well the capitalistic engine would run if that happened?? Look to China for a clue... before they run over us like a steamroller.
Sounds good to me!
RE: Somebody please ‘splain to me the definition of the word “limit”, because my dictionary seems to have it all wrong.
Here’s an explanation from Seeking Alpha :
http://seekingalpha.com/article/246392-the-behavioral-case-for-the-debt-ceiling
Let’s take a personal-finance analogy here. A credit card company comes along and offers you a card with a $200,000 credit limit—much more than you should ever borrow. But you know that if the money is there for the spending, you’ll be more likely to spend it. So you phone up the credit card company and do a deal with them. You set the limit very low—$1,000, say—and then, any time you want to go over that limit, you have to phone up the credit card company and get them to raise it.
You know in advance that the credit card company will say yes: after all, they’ve already told you that as far as they’re concerned they’re happy to lend you $200,000. But being forced to phone them up and ask for a credit-line increase helps to drive home the consequences of your spending decisions, in a way that simply whipping your card out at the Apple Store doesn’t.
So far so good. But what if you were using your card not only to buy iPads, but also to make rent? And what if there were possible glitches with the system whereby you phoned up and asked for a credit-limit increase, so that you couldn’t be sure it would always work? And what if a single late rent payment could be catastrophic, ending up with you thrown out of your home? At that point, your clever system would stop seeming so clever, and start seeming downright risky.
And that’s the problem with the debt ceiling. It might have interesting and possibly even beneficial behavioral second-order effects, although there’s precious little evidence for that. But getting those beneficial effects means playing with fiscal high explosives, which run the risk of blowing up in the economy’s face and causing major damage. It simply isn’t worth it.
Raising the debt ceiling doesn’t solve the core problem of overspending.
When solving problems, it’s best to attack the core.
I like it! Clean, easy to understand and explain. My only concern is that it requires balls to make such a strong demand, which GOP seems to have misplaced.
I don’t like it.
The government should be subject to a debt limit they have no control over just like the rest of us. If they cannot stay under that debt limit they need to spend less just like the rest of us. That means no to raising the debt limit and yes to obamacare.
yes to repealing obamacare
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