In 1917 the US Congress instituted the debt limit as a mechanism for keeping its spending in check. It worked for a while, but then in the 1960s the Johnson Administration began spending money like a drunken sailor. (Actually that gives drunken sailors a bad name. When they run out of money, they have to stop drinking.)
Throughout the last 50 years Congress has been drinking heavily, but unlike sailors whose money supply limited their consumption, Congress found it could keep its habit going by borrowing money to drink. When it hit the spending limit imposed by the debt ceiling, not to worry – just raise the ceiling.
Since 1962, the Congress has raised the debt ceiling 74 times, about once every eight months, and in the past 10 years, Congress has raised the debt limit 10 times. Little fanfare accompanied this spending alchemy and little was done to slow down the excesses that necessitated going back to the banker – the American people – to put more future generations on the line to pay for the gluttony of their parents and grandparents. Only when opposing parties held the White House and Congress did the participants drag out their Kabuki costumes so they could overdress and overact as if either party gave a flip about the consequences of increasing the spending limit. And when the Kabuki charade was over and each party had postured in righteous indignation for its respective constituency – at least enough to assure reelection – the two sides went back to the hard task of spending more money.
This time may be different.
The current occupants of the House of Representatives and a third of the Senate were elected in 2010 by an electorate which seemed intent on ending juvenile delinquency in Congress. Voters will be paying attention as never before to the debt ceiling debates that will begin in just a few weeks. One hopes that enough of them are sick of the profligate spending in Washington to make it the key issue in the 2012 elections. If those Representatives sent to Congress in 2010 fail to get the job done, they should be thrown out and replaced as their predecessors were. And while the newly minted and reelected 2010 Senators are safe for six years, another third will be on trial for their lives as well as a president who doesn’t seem to know the meaning of restraint.
The American people want government downsized and spending reduced. Those they elected in 2010 talked the talk; if they don’t walk the walk, off with their heads and bring in the next group of try-outs.
No more debt ceiling increases as usual!
Why have a debt ceiling at all if it is going to be routinely increased every eight to 12 months? Why don’t we just get rid of the debt ceiling altogether? Oh, because Congress needs some restraint. Okay, then, let’s restrain them. Don’t raise the debt ceiling. Or if it is raised, make the incremental increase so small that it only gives the big spenders in Washington no more than a month to get serious about cutting spending. Giving Congress another trillion in breathing room on top of the $14 trillion they’ve already blown just delays the inevitable. But a few billion in additional credit? That’s decimal dust and will force Congress to focus. More importantly, it will cause the American people to focus because small incremental increases will make the debt issue the subject for the evening news talking heads for years until the problem is solved.
The US will bump up against the current $14.3 trillion debt ceiling this month. Don’t be fooled by what you hear coming out of the Democrat camp and Tim Geithner, Obama’s hapless deer-caught-in-the-headlights Treasury Secretary. Both would have you believe that the US will suffer an economic Armageddon if the debt ceiling isn’t raised immediately and raised big. Phooey! The US will not default on its debt, and if Geithner truly believes that, he needs to resign his cabinet post and look for a real job.
Here’s why.
If Congress refuses to raise the debt ceiling, the federal government will still have more than enough money to fully service our debt. Next year, about 7% to 10% of all projected federal government expenditures will go to interest on our debt. Tax revenue is projected to cover at least 70% of all government expenditures. So, under any circumstances, there will be plenty of money to pay our creditors.
Moreover, as the Congressional Research Service has noted, the Treasury Secretary himself has the discretion to decide which bills to pay first in the event that a cash flow shortage occurs. Thus, it is Geithner who would have to consciously, and needlessly, choose to default on the national debt if Congress chooses not increase the debt ceiling.
Geithner, however, disagrees, using this analogy of a typical American homeowner to explain why: "A homeowner could decide to 'prioritize' and continue paying monthly mortgage payments, while opting to cease paying other obligations, such as car payments, insurance premiums, student loan and credit card payments, utilities, and so forth. Although the mortgage would be paid, the damage to that homeowner's creditworthiness would be severe."
Geithner, however, mistakenly assumes that American homeowners always pay their expenses with borrowed funds because that’s the way the government does. Most do not. When tough times come, families eat out less, go to fewer movies, buy fewer clothes, and postpone vacations. If those things don't save enough, then they might borrow money to pay bills or skip payments, but their credit limit will always keep their spending in check.
Congress has largely avoided the cost-cutting that families are forced to do. The feds have not reduced spending despite lower tax revenues during the current recession. Now, the Obama administration says if we don't raise the debt ceiling, the nation could go into catastrophic default.
Congress has never before refused to raise the debt ceiling. But it has frequently taken its sweet time to do so. In 1985, Congress waited nearly three months after the debt limit was reached before authorizing a permanent increase. In 1995, 4-½ months passed between the time the country hit the debt ceiling and congressional action. No, the sky did not fall. And in 2002, Congress delayed raising the debt ceiling for three months. In each case, the U.S. and the economy survived.
Federal revenues will reach $2.2 trillion this fiscal year. Interest payments on the nation’s debt are estimated to be $205 billion this year. Taking interest payments off the top leaves $1.9 trillion for Congress to spend. That’s enough to pay for Social Security ($741 billion), Medicare ($488 billion), and Medicaid ($276 billion), with $395 billion left for other programs.
Clearly $395 billion is not going to pay for the bloated government the country has come to tolerate under Bush and Obama without ever thinking about how to pay for it. Assuming entitlements mentioned above are not touched, $395 billion won’t pay the defense budget, for example. The DoD requested a jaw-dropping $553 billion for next year – about $1,800 for every man, woman, and child in this country (excluding illegals, of course.) DoD also wants an additional $118 billion for “overseas contingency operations” whatever the heck that is. A couple of hundred bombs dropped on Libya maybe?
So, there is no more money and $395 billion can’t cover the nearly $700 billion for the Pentagon, and it certainly can’t be further stretched to cover $115 billion or so for homeland security, $82 billion for HHS, $77 billion for education, $42 billion for HUD, $21 billion for DOJ, $22 billion for agriculture, $14 billion for Treasury, $13 billion each for the Labor and Transportation Departments, $12 billion for the Interior Department, $10 billion for EPA, and on and on and on. And we still have to pay for the excesses of ObamaCare down the road whose price tag we don’t yet know.
The people running this government are never going to deal with our unsustainable spending situation unless and until it becomes unavoidable for them to ignore it. The only way to make that happen is for Congress to refuse to raise the debt ceiling and force Obama to prioritize payment of those obligations that must be paid to maintain the full faith and credit of the United States. Only when there is no way around it will the American people, more particularly the taxpayers, get serious about what government should and should not do, and what kind of welfare state they are willing to pay for.
If America truly demands all this spending by the feds, then let's pay for it now. Let's raise taxes to cover it all. But if we paid for current spending with current revenue it would require hiking taxes almost $1.7 trillion. That's the projected deficit for 2011, and it dwarfs this year's individual income tax receipts, estimated to be $956 billion. Even if we doubled this year's total budgeted tax receipts, about $1.614 trillion, we still couldn't cover the deficit for 2011.
So given the current level of spending, all Americans – including the 50% who pay no taxes – should be compelled to pay for what Obama and Congress spend, instead of shifting it to future generations. As long as there are free loaders who pay no taxes, they will take no interest in government spending. Yes, I mean taxing even the little old blue-haired ladies. Once everyone got interested in what government spends, there would be blood and rioting in the streets. The economy would crash and maybe, just maybe, voters (included the current free loading voters) would demand an end to the insane spending or throw out the big spenders.
But as long as our wrong-headed government continues to run budget deficits, its access to cheap borrowing – i.e. low interest rates – is the only way it can avoid default. For example, assume that interest rates don't change and continue to stay low. Then in 2020, 70 cents of every federal dollar will be spent on interest to service the debt, Social Security, Medicare and Medicaid. But if interest rates rise by just 1%, 90 cents of every dollar would go toward the debt, Social Security, Medicare and Medicaid, leaving just 10 cents to split among education, defense and all other discretionary items.
Perhaps the strongest argument for not raising the debt ceiling, as these figures show, is that the US is bound to default the debt in the next decade or so. It will either explicitly renege on payments – unlikely – or it will print so much money that it pays its debt in cheap dollars – the most likely scenario. The government's own projections show the debt quickly rising to alarming levels under reasonable assumptions, and none of their models considers the possibility of a continued recession and a collapsing dollar.
The debt ceiling, boys and girls, is the key in stopping the politically-motivated spending insanity. It will prevent the inevitable collapse of the dollar and the economy, which will happen if Washington keeps to its spendthrift ways, and it is the best way to enforce restraint on the cowards in Washington. Of course voluntary spending reductions would be better than capping the credit spigot. But absent that, cutting up the Congressional credit card is better than the Kabuki dance that Congress is about to embark on.
Refusing to raise the debt ceiling would be a "balanced-budget amendment with teeth," as one pundit observed. Politicians are notorious for avoiding budget cuts that might alienate the powerful interest groups which contribute to their campaign coffers. But if the newly elected budget "hawks" really want to impress us, let them refuse to raise the debt ceiling regardless of John Boehner’s or Mitch McConnell’s rants. That will give the old guard no choice but to start slashing.
Almost five years ago, in March, 2006, the usually silent junior Democratic senator from Illinois, Barack Obama, unexpectedly piped up to oppose increasing the nation's debt ceiling, explaining:
The fact that we are here today to debate raising America's debt limit is a sign of leadership failure. It is a sign that the US government can't pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our government's reckless fiscal policies. ... Increasing America's debt weakens us domestically and internationally. Leadership means that "the buck stops here." Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better.
Of course, George Bush was president then. Senator Obama's insight five years ago about the ever rising debt as a "failure of leadership" and that "Americans deserve better" is one of the few things he’s ever gotten right.
Throughout the last 50 years Congress has been drinking heavily, but unlike sailors whose money supply limited their consumption, Congress found it could keep its habit going by borrowing money to drink. When it hit the spending limit imposed by the debt ceiling, not to worry – just raise the ceiling.
Since 1962, the Congress has raised the debt ceiling 74 times, about once every eight months, and in the past 10 years, Congress has raised the debt limit 10 times. Little fanfare accompanied this spending alchemy and little was done to slow down the excesses that necessitated going back to the banker – the American people – to put more future generations on the line to pay for the gluttony of their parents and grandparents. Only when opposing parties held the White House and Congress did the participants drag out their Kabuki costumes so they could overdress and overact as if either party gave a flip about the consequences of increasing the spending limit. And when the Kabuki charade was over and each party had postured in righteous indignation for its respective constituency – at least enough to assure reelection – the two sides went back to the hard task of spending more money.
This time may be different.
The current occupants of the House of Representatives and a third of the Senate were elected in 2010 by an electorate which seemed intent on ending juvenile delinquency in Congress. Voters will be paying attention as never before to the debt ceiling debates that will begin in just a few weeks. One hopes that enough of them are sick of the profligate spending in Washington to make it the key issue in the 2012 elections. If those Representatives sent to Congress in 2010 fail to get the job done, they should be thrown out and replaced as their predecessors were. And while the newly minted and reelected 2010 Senators are safe for six years, another third will be on trial for their lives as well as a president who doesn’t seem to know the meaning of restraint.
The American people want government downsized and spending reduced. Those they elected in 2010 talked the talk; if they don’t walk the walk, off with their heads and bring in the next group of try-outs.
No more debt ceiling increases as usual!
Why have a debt ceiling at all if it is going to be routinely increased every eight to 12 months? Why don’t we just get rid of the debt ceiling altogether? Oh, because Congress needs some restraint. Okay, then, let’s restrain them. Don’t raise the debt ceiling. Or if it is raised, make the incremental increase so small that it only gives the big spenders in Washington no more than a month to get serious about cutting spending. Giving Congress another trillion in breathing room on top of the $14 trillion they’ve already blown just delays the inevitable. But a few billion in additional credit? That’s decimal dust and will force Congress to focus. More importantly, it will cause the American people to focus because small incremental increases will make the debt issue the subject for the evening news talking heads for years until the problem is solved.
The US will bump up against the current $14.3 trillion debt ceiling this month. Don’t be fooled by what you hear coming out of the Democrat camp and Tim Geithner, Obama’s hapless deer-caught-in-the-headlights Treasury Secretary. Both would have you believe that the US will suffer an economic Armageddon if the debt ceiling isn’t raised immediately and raised big. Phooey! The US will not default on its debt, and if Geithner truly believes that, he needs to resign his cabinet post and look for a real job.
Here’s why.
If Congress refuses to raise the debt ceiling, the federal government will still have more than enough money to fully service our debt. Next year, about 7% to 10% of all projected federal government expenditures will go to interest on our debt. Tax revenue is projected to cover at least 70% of all government expenditures. So, under any circumstances, there will be plenty of money to pay our creditors.
Moreover, as the Congressional Research Service has noted, the Treasury Secretary himself has the discretion to decide which bills to pay first in the event that a cash flow shortage occurs. Thus, it is Geithner who would have to consciously, and needlessly, choose to default on the national debt if Congress chooses not increase the debt ceiling.
Geithner, however, disagrees, using this analogy of a typical American homeowner to explain why: "A homeowner could decide to 'prioritize' and continue paying monthly mortgage payments, while opting to cease paying other obligations, such as car payments, insurance premiums, student loan and credit card payments, utilities, and so forth. Although the mortgage would be paid, the damage to that homeowner's creditworthiness would be severe."
Geithner, however, mistakenly assumes that American homeowners always pay their expenses with borrowed funds because that’s the way the government does. Most do not. When tough times come, families eat out less, go to fewer movies, buy fewer clothes, and postpone vacations. If those things don't save enough, then they might borrow money to pay bills or skip payments, but their credit limit will always keep their spending in check.
Congress has largely avoided the cost-cutting that families are forced to do. The feds have not reduced spending despite lower tax revenues during the current recession. Now, the Obama administration says if we don't raise the debt ceiling, the nation could go into catastrophic default.
Congress has never before refused to raise the debt ceiling. But it has frequently taken its sweet time to do so. In 1985, Congress waited nearly three months after the debt limit was reached before authorizing a permanent increase. In 1995, 4-½ months passed between the time the country hit the debt ceiling and congressional action. No, the sky did not fall. And in 2002, Congress delayed raising the debt ceiling for three months. In each case, the U.S. and the economy survived.
Federal revenues will reach $2.2 trillion this fiscal year. Interest payments on the nation’s debt are estimated to be $205 billion this year. Taking interest payments off the top leaves $1.9 trillion for Congress to spend. That’s enough to pay for Social Security ($741 billion), Medicare ($488 billion), and Medicaid ($276 billion), with $395 billion left for other programs.
Clearly $395 billion is not going to pay for the bloated government the country has come to tolerate under Bush and Obama without ever thinking about how to pay for it. Assuming entitlements mentioned above are not touched, $395 billion won’t pay the defense budget, for example. The DoD requested a jaw-dropping $553 billion for next year – about $1,800 for every man, woman, and child in this country (excluding illegals, of course.) DoD also wants an additional $118 billion for “overseas contingency operations” whatever the heck that is. A couple of hundred bombs dropped on Libya maybe?
So, there is no more money and $395 billion can’t cover the nearly $700 billion for the Pentagon, and it certainly can’t be further stretched to cover $115 billion or so for homeland security, $82 billion for HHS, $77 billion for education, $42 billion for HUD, $21 billion for DOJ, $22 billion for agriculture, $14 billion for Treasury, $13 billion each for the Labor and Transportation Departments, $12 billion for the Interior Department, $10 billion for EPA, and on and on and on. And we still have to pay for the excesses of ObamaCare down the road whose price tag we don’t yet know.
The people running this government are never going to deal with our unsustainable spending situation unless and until it becomes unavoidable for them to ignore it. The only way to make that happen is for Congress to refuse to raise the debt ceiling and force Obama to prioritize payment of those obligations that must be paid to maintain the full faith and credit of the United States. Only when there is no way around it will the American people, more particularly the taxpayers, get serious about what government should and should not do, and what kind of welfare state they are willing to pay for.
If America truly demands all this spending by the feds, then let's pay for it now. Let's raise taxes to cover it all. But if we paid for current spending with current revenue it would require hiking taxes almost $1.7 trillion. That's the projected deficit for 2011, and it dwarfs this year's individual income tax receipts, estimated to be $956 billion. Even if we doubled this year's total budgeted tax receipts, about $1.614 trillion, we still couldn't cover the deficit for 2011.
So given the current level of spending, all Americans – including the 50% who pay no taxes – should be compelled to pay for what Obama and Congress spend, instead of shifting it to future generations. As long as there are free loaders who pay no taxes, they will take no interest in government spending. Yes, I mean taxing even the little old blue-haired ladies. Once everyone got interested in what government spends, there would be blood and rioting in the streets. The economy would crash and maybe, just maybe, voters (included the current free loading voters) would demand an end to the insane spending or throw out the big spenders.
But as long as our wrong-headed government continues to run budget deficits, its access to cheap borrowing – i.e. low interest rates – is the only way it can avoid default. For example, assume that interest rates don't change and continue to stay low. Then in 2020, 70 cents of every federal dollar will be spent on interest to service the debt, Social Security, Medicare and Medicaid. But if interest rates rise by just 1%, 90 cents of every dollar would go toward the debt, Social Security, Medicare and Medicaid, leaving just 10 cents to split among education, defense and all other discretionary items.
Perhaps the strongest argument for not raising the debt ceiling, as these figures show, is that the US is bound to default the debt in the next decade or so. It will either explicitly renege on payments – unlikely – or it will print so much money that it pays its debt in cheap dollars – the most likely scenario. The government's own projections show the debt quickly rising to alarming levels under reasonable assumptions, and none of their models considers the possibility of a continued recession and a collapsing dollar.
The debt ceiling, boys and girls, is the key in stopping the politically-motivated spending insanity. It will prevent the inevitable collapse of the dollar and the economy, which will happen if Washington keeps to its spendthrift ways, and it is the best way to enforce restraint on the cowards in Washington. Of course voluntary spending reductions would be better than capping the credit spigot. But absent that, cutting up the Congressional credit card is better than the Kabuki dance that Congress is about to embark on.
Refusing to raise the debt ceiling would be a "balanced-budget amendment with teeth," as one pundit observed. Politicians are notorious for avoiding budget cuts that might alienate the powerful interest groups which contribute to their campaign coffers. But if the newly elected budget "hawks" really want to impress us, let them refuse to raise the debt ceiling regardless of John Boehner’s or Mitch McConnell’s rants. That will give the old guard no choice but to start slashing.
Almost five years ago, in March, 2006, the usually silent junior Democratic senator from Illinois, Barack Obama, unexpectedly piped up to oppose increasing the nation's debt ceiling, explaining:
The fact that we are here today to debate raising America's debt limit is a sign of leadership failure. It is a sign that the US government can't pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our government's reckless fiscal policies. ... Increasing America's debt weakens us domestically and internationally. Leadership means that "the buck stops here." Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better.
Of course, George Bush was president then. Senator Obama's insight five years ago about the ever rising debt as a "failure of leadership" and that "Americans deserve better" is one of the few things he’s ever gotten right.
They (the failure of leadership gang) have to know what they are doing. There is a hidden agend, excpet it ain't hiden. Government failure and total financial collapse, seems to be the objective and inevitable. If so mission accomplished. The issues seem insurmountable, and the rhetoric is all poppycock. The same things have been said by every candidates since I can remember being politically aware. Barnum was correct. We are all suckers for letting the scoundrels get away with their gerimandering and inaction. The U.S. is a house divided. Pritch
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