Skip to comments.What the Debt Limit Battle Is All About
Posted on 07/18/2011 4:02:30 AM PDT by Kaslin
It's hard to keep up with all the arguments and proposals in the debt limit struggle. But what's at stake is fundamental.
The bedrock issue is whether we should have a larger and more expensive federal government. Over many years, federal spending has averaged about 20 percent of gross domestic product.
The Obama Democrats have raised that to 24 or 25 percent. And the president's budget projects that that percentage will stay the same or increase far into the future.
In the process, the national debt as a percentage of gross domestic product has increased from a manageable 40 percent in 2008 to 62 percent this year and an estimated 72 percent in 2012. And it's headed to the 90 percent level that economists Kenneth Rogoff and Carmen Reinhart have identified as the danger point, when governments face fiscal collapse.
This is a level of spending as a share of the economy Americans haven't seen since World War II. It seems more like Europe than like the America we have known.
President Obama insisted in his somber press conference Friday that he is willing to reduce federal spending from these levels. But he remained vague on specifics and intransigent in his demand that any debt limit deal include "revenue," which translated into English means tax increases.
Mainstream media have pummeled Republicans for pushing spending cuts and refusing to support tax increases in connection with raising the debt limit.
But Republicans had a mandate from the voters in November 2010 to advance such policies. In contrast, it's not at all clear that voters in November 2008 gave Obama and the Democrats a mandate to increase non-defense discretionary spending by 24 percent (84 percent if you count the stimulus package) in 2009 and 2010.
In negotiations on the debt limit, Obama has fenced off several programs from any cuts at all. One is Obamacare, even though majorities in polls continue to favor its repeal.
Another is, astonishingly, the $53 billion he wants to spend on high-speed rail projects. To call high-speed rail a "boondoggle," as does House Budget Committee Chairman Paul Ryan, is to engage in considerable understatement.
These projects include $715 million for construction of 100 miles of track between the small towns of Borden and Corcoran in California's Central Valley.
They include a train from Iowa City, Iowa, that will take longer to get to Chicago than already existing bus service and a train from Minneapolis to Duluth, Minn., that will average 69 miles per hour -- about what you could average on the parallel Interstate 35.
Obama has rhapsodized about the pleasure of walking to a train station and taking a high-speed rail trip to another city. But the great majority of Americans don't live within an easy drive of a train station.
He has called high-speed rail an "investment" in cutting-edge technology. But it's hardly cutting-edge: Japan debuted its bullet train in 1964, and France inaugurated its TGV in 1981.
As for investment, Oxford professor Bent Flyvbjerg analyzed results from dozens of rail projects in 20 countries over the last 70 years. He found that 75 percent ended up costing at least 24 percent over projections and 25 percent exceeded projections by more than 60 percent.
No wonder the governors of Wisconsin, Ohio and Florida have turned down federal money for rail projects that parallel interstate highways. They realize that their taxpayers would get stuck for inevitable cost overruns and operating deficits.
A high-speed rail line might make sense in the densely populated Northeast corridor between Washington and Boston, and as a Washingtonian who travels frequently to Manhattan I would love a faster train than the current Acela. But these projects make no sense in most of the rest of America.
High-speed rail is not the biggest item in the budget. But it's emblematic of the Obama Democrats' theory that government spending can stimulate the economy.
That theory has been pretty well demolished by the fact of 9.2 percent unemployment. The clear signal from both economic markets and political polls is that we should cut federal spending back from 25 percent of GDP toward 20 percent.
It's not clear how far the Republicans can move toward this goal in the debt limit battle, or whether they can move any distance at all. But it's worth trying if only to clarify the choice before voters next year.
“The bedrock issue is whether we should have a larger and more expensive federal government.”
No, the bedrock issue is whether we should have less freedom and more “services.” Freedom or security (slavery).
Anyone calling it simply “more government” is repeating, reinforcing and sanctioning The Lie.
Haven't the American people repeatedly answered this in the affirmative? Isn't the current debate over whether Americans can continue to live in their delusional world of denial or if reality will be acknowledged before the coming massive crash?
I, for one, am not underestimating the ability of the American people to deny reality until it becomes too painful and too late to do anything but slammed in the face by reality.
Sums it up perfectly - zer0 is trying to raise taxes to prosperity.
I live within news broadcasts of a highway with many bridges that is often violated, as the picture depicts. I've often thought of the drivers of these trucks as pretty stupid, ignoring all the signs and warnings and still plodding into the bridge. This stupidity continues to apply in the current circumstance.
The bedrock is the reelection of Obama and solidifying socialism in the US.
To think otherwise is naive.
I am embarrassed that we are talking about the FedGuv sucking up 20% of the GDP as if that is an acceptable thing. It may be the best we can do, under the circumstances, but it is far from good.
“Sell not virtue to purchase wealth, nor Liberty to purchase power.”
There must always be a tension to produce positive results (price v. demand). No state would wish to understate the health of its' economy or overpay its' taxes - tension provided.
I have been trying to recall the Republicans reducing the size and scope of government. Now let me think.....Nope can’t recall. Can anyone think of one?
If all the decrectioary spendind were removed from the budget, it wouldn’t ammount to a pimple on a RATS butt. They all know it too.
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