Once again, Congress will soon begin to debate raising the nation’s debt limit. Many are beginning to question why we must endure this dog-and-pony show several times a year. Others are questioning the value of the debt limit at all. Most importantly, few understand the meaning or significance of the issue.
Simply put, the debt limit is the maximum amount of debt the nation has been authorized to accumulate. Reaching that limit means the credit card is maxed out. Raising the limit is akin to raising your credit limit on your cards, or taking out an additional card when you have maxed out all available credit.
The President makes his case for raising the debt limit with rhetoric implying that it is necessary for us to do so in order to pay our bills. Think about what that means!
If your husband or wife came to you telling you that you had to take out another credit card so you could afford to pay your current bills, wouldn’t you sense something is wrong with the family finances? How does borrowing help to pay bills, when you incur further debt and interest by doing the borrowing? Any sane family finding itself in this situation would take a serious look at their expenses and spending rather than incurring additional debt by borrowing from Peter to pay Paul! You don't "PAY" your bills by borrowing. You can't get out of debt by acquiring more.
A little historical perspective:
When George W Bush took office, we had a budget surplus, thanks to the Gingrich Revolution and the GOP majority in Congress dragging Bill Clinton kicking and screaming to balanced budgets. Our National debt was $4 Trillion. Our economy was doing well with a GOP Congress at the helm. We had nearly full employment.
The dot.com bust, the sub-prime housing debacle and 9/11 and the subsequent involvement in 2 war fronts took a toll. Spending increased, and in 2003 our deficit ballooned to a high of $420 Billion. (While that number would be a major blessing by today’s standards, at the time it was alarmingly large.) How did Bush respond? Tax cuts. Yes, the very tax cuts that were expiring and being debated at the end of Obama’s first term.
Did these tax cuts reduce revenues and drive us into economic catastrophe? Hardly. They did what cuts of tax rates always do… they increased revenues! Our deficit declined in each of the following 3 years. In fact, in 2006, the deficit had been reduced from a high of $420 Billion down to under $125 Billion and we were on track to restore a balanced budget in another year or so.
Unfortunately, the Bush deficits added $2 Trillion to our debt over the six years from his inauguration until 2006. Our debt went from $4 Trillion to $6 Trillion over those 6 years. This was judged harshly by the American people and Congress changed hands, turning over the reins to the Democrats and to Pelosi and Reid.
This turned out to be a consequential decision, as instead of balancing the budget over the last 2 years of Bush’s presidency, Congress massively increased spending. In their first year, the Pelosi/Reid Congress tripled the 2006 deficit to over $450 Billion, $30 Billion more that Bush’s worst deficit with a GOP congress – in 2003. In their 2nd year, they tripled the deficit again, to bring the deficit to a number unheard of and unimaginable just a few years earlier. The deficit that year topped $1.2 Trillion, and has never been below $1 Trillion a year since. In 2006 our spending was around $2 Trillion a year. It’s now over $3 Trillion and approaching $4 Trillion. In 2006 our debt was $6 Trillion. In the 6 years following, it has increased to $16 Trillion, for an increase of $10 Trillion since Pelosi and Reid took the gavel.
Were we not spending enough in 2006? Did we need to DOUBLE that level of spending?
Instead of giving Obama an American Express Black Card, with unlimited credit – why don’t we take a hard look at our expenditures? The President seems intractably unwilling to even consider any serious reductions anywhere! He believes we simply need to enhance revenues by asking more of our “wealthiest Americans”. The "Fiscal Cliff" deal raised rates on those earning $400K or more. Under the best of circumstances this might generate $20-30 Billion and in all likelyhood will net less. Remember our deficit is on the order of $1.3 Trillion or 13,000 Billion and taxing the rich won't net us 50 of 13,000 Billion!
Unfortunately, nobody’s ever alerted the President to the facts and the math. There isn’t enough money attributable to the so-called “rich” to cover our deficit even if we confiscated it all! Those earning $200K or more are responsible for less than $1.4 Trillion in total earnings, and they’re ALREADY paying taxes on it – so if you confiscated every penny of what’s left after current taxes, you’d net less than $1 Trillion in new additional revenue – after utterly eliminating the entire upper class. This would still leave us with a deficit larger than Bush’s 2006 deficit!
So if we can't address the problem with revenue, we must address the spending side of the equation.
Since there seems to be such a reticence to name something to cut by those holding elected office, perhaps some of the suggestions below may provide a starting point!
ObamaCare was passed with the promise of making healthcare coverage more accessible and more affordable. The reality has been demonstrated that it has done neither and has been, in fact, counter-productive. Why not simply declare it a failure, defund and repeal it, and save trillions?
The United States currently provides foreign aid to every nation on earth with 7 exceptions. Why, when we’re borrowing a dollar out of every 3 we spend? Sure, we should continue to aid and support allies where our investment yields a direct benefit to us of equal or greater value. But simply redistributing our wealth worldwide is not in our vital interests, especially when we have to borrow to do it.
Grants of all stripes should be reconsidered. If it’s so important to study the sex habits of some obscure species or how long a shrimp can run on a treadmill… let private industry or academia fund it. If it’s not worth investing capital to study, perhaps it doesn’t need to be studied. How about removing the dis-incentives to business investment, and allowing private enterprise to be the engine of innovation?
Likewise, “corporate welfare” like the subsidies to the numerous failed green initiatives should be curtailed. Solyndra’s failure would not have been a scandal if it weren’t for the half-trillion dollars of taxpayer money that was first shoveled into their coffers. And that scenario was repeated again and again and again with dozens of other “green” ventures which went bust or are at risk to do so after receiving $90 Billion total federal funds. Enough to have hired 2 million teachers or cops!
Entitlements represent 2/3 of the spending of the USA. Borrowing represents 1/3 of our spending. If we eliminated ALL non-entitlement spending, we’d have a just about balanced budget – but all we’d be doing is taking money from Peter to distribute to Paul. (We wouldn’t be building those beloved roads and bridges!) Entitlements MUST be on the table. They MUST be reformed. Yes, guarantee that current Social Security and Medicare recipients won’t be cut off, but we must make adjustments to the future benefits of yet future recipients. No one has proposed anything cutting benefits for those currently 55 years old or older. But actuarially we cannot sustain the current benefit level for those who are younger. Kicking the can down the road without addressing this problem now will make it only more painful later when the reality hits that we have actually run out of other people’s money.
We cannot continue to authorize more and more debt. We cannot operate without a budget on continuing resolutions that simply continue massive levels of spending. It is time to say, "Thus far and no further." We've hit the ceiling. We've hit the roof. Credit limit increase – DENIED. We've already endured several downgrades in our national credit rating. How long before the “full faith and credit” of the United States is no longer looked upon as a guarantee?
If the House has the fortitude, they should pass the 2006 budget as our 2013 budget, and adjourn. Let the Senate and the President either accept it as our budget, or shut down the government when we have spent the last authorized dollar.